Pegasus Capital

With the UK in recession, the continued threat from the Euro region and the USA still sluggish, it is no surprise that interest rate rise expectations have all but disappeared in the near term.

Both LIBOR rates (out to 1 year) and Fixed Term rates (longer than 1 year) were lower. A comparison of the implied forward curve for SONIA (the closest market benchmark to the UK Base Rate) shows that the markets view for possibility of a cut in the Base Rate by another 25bp  has increased in the near-term and that Base Rates over 1% will come in mid 2016 rather than the end of 2015 predicted at the end of last month.

UK Government  Bond yields tightened in as the Bank Of England continued it’s Quantitative Easing programme and International Investors continued buying UK Gilts in preference to Euro Sovereign Debt. The 10 year UK Gilt Benchmark closed at a yield of 1.4850%  (1.7340%) and the 30 year UK Gilt Benchmark closed at a yield of 2.8860% (3.0380%).

In the Foreign Exchange Market GBP was pretty much unchanged against the USD$ at 1.5650 (1.5707) , but stronger against the EURO at 1.2740 (1.2401)

In the credit markets the UK Banks performance was varied, with RBS, Lloyds, Nationwide and Santander UK credit spreads (risk) all tighter (less), but Barclays and HSBC both slightly wider (increased risk).

Tags: Recession

PegasusCapital - Wed 1st Aug

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A View from the Bridge - Sep 2017

UK GDP increased by 0.3% quarter-on-quarter in Q2, matching the second quarter estimate and the consensus however, the y-o-y growth rate was revised down to 1.5%, from 1.7%. In addition, the latest PMI survey showed a modest deceleration in the rates of expansion in UK manufacturing production and new orders. Exports remain a bright spot and are still rising at one of the strongest rates over the past six-and-a-half years however, manufacturing is also increasingly being impacted by rising cost inflationary pressures due to rising commodity prices and higher import costs from the historically weak sterling exchange rate.
Tags: UK GDP, ECB, FOMC

PegasusCapital - Wed 4th Oct