Temporary gilt measures extended until Nov 10th
Overnight & Macro
US indices reversed sharply on Friday as jobs data failed to deliver a sufficient shock to undermine the Fed’s hawkishness. Markets gave back all the gains from earlier in the week as Treasury yields increased in anticipation of another +75bp rate hike at the November policy meeting. The Fed has not yet created enough unemployment.
Technology stocks led the market declines, with the semiconductor suppliers particularly weak on disappointing news from Samsung and further moves by the US to block exports to China.
The US dollar is firmer again this morning, while oil continues its upward path from last week’s OPEC+ rally. Today it is further spurred by escalations in the Ukrainian conflict.
This week sees US inflation data. The headline rate is expected to edge lower, with the consensus at +8.1% YoY. Still way ahead of the 2% target.
Next week US Investor attention will start to move to corporate news with the imminent 3Q reporting season. As Warren said, when the tide goes out we get to see who is swimming naked.
The UK gilt market is focused on this Friday when the temporary liquidity assistance measures are due to end. Long-dated gilt yields are rising but remain below the 5% they ballooned to on September 28th.
The BoE has confirmed today that it has offered to purchase £40bn of gilts in the last eight days but has only had to buy a total of £10bn. It remains prepared to utilise the remainder of the £65bn scheme before the end of this week.
However, the BoE has also set in place further measures under a Temporary Expanded Collateral Repo Facility to cushion LDI-driven pension funds cop with the impact of rapid yield spikes. This measure kicks the can down the road until November 10th. Nothing is more permanent than a temporary government measure.
NB Prices are as at the previous day’s close.
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