Bailey’s three day warning
Macro & Overnight
When financial market news makes the front pages, it isn’t good. Overnight Andrew Bailey, Governor of the BoE, issued an ultimatum to the LDI pension schemes to use his temporary facility by the close of play on Friday or suffer the consequences. What he said was not new, but his language was more confrontational. The pound weakened overnight in anticipation of a gilt market cliff edge moment on Friday. However, the FT reported overnight that Bailey had privately briefed bankers that he was prepared to extend BoE support beyond the end of this week. This seems to have prevented a significant sell-off this morning, albeit long-dated gilt yields have started to revisit the panic levels seen last week. The worry is that the tensions between the UK treasury and the Bank are spilling into the open. This will further undermine the UK’s financial and political credibility. This saga has further to run.
UK GDP numbers for September that were lower than expected were relatively inconsequential.
US Treasury Secretary Yellen said overnight that the “market-determined value of the dollar is in America’s interests”, effectively a denial that there is any consideration of a Plaza Accord moment ahead. Evidence to a cynic that we are indeed closer to such an outcome.
Attention in the US will be on the CPI data tomorrow. A hot inflation number will feed further rate hawkishness and compound bond market woes.
UK Company News
Housebuilder Barratt unsurprisingly reported weaker activity levels in recent weeks. However, they also guided to unchanged profit expectations for the full year to June 2023. Troubled rubber glove supplier Synthomer updates investors on its prospect, strategy, and balance sheet in a CMD. In the process, it managed to spook investors regarding its refinancing requirements. Darktrace gave an inline update but highlighted exchange rate headwinds, while defence services supplier Qinetiq also guided inline.
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