Why wouldn’t it be?
Personal interest payments for households in the United States have hit an all-time high with annualized interest payments now $321 billion, this despite low interest rates currently.
Continue reading “U.S. Personal interest payments hit all time high despite low interest rates”
Investors seek safety
What a difference a week makes, just last week everyone was talking about soaring bond yields. Investors are now seeking safety with developed economies bond yields falling significantly during the week.
Here are some 10-year bond yields, figures in brackets indicate change during the week.
US 2.93% (-15 bps)
UK 1.32% (-21 bps)
Germany 0.41% (-17 bps)
Canada 2.35% (-14 bps)
Switzerland 0.00% (-13 bps)
Netherlands 0.59%% (-15 bps)
Australia 2.79% (-13 bps) Continue reading “Weekly Overview: Investors seek safety as bond yields fall; Crude Oil down 5%; Baltic Dry Index down 15%; Bank of England Governor prepared to cut or freeze interest rates; US E-Commerce Retail sales soaring”
We recently wrote about the impact of rising interest rates for UK households, read more about it here. We also wrote about the impact of higher bond yields for the US government, read more about it here.
Impact of higher interest rates for the UK Government
The UK government has around £1.72 trillion in debt and pays around £36 billion in interest payments a year (an effective interest rate of 2%).
The UK tax revenues are around £800 billion a year, which would mean 4.5% of all tax revenues are paid as interest. The UK has paid £540 billion in interest since it last ran a surplus in 2001.
Continue reading “Can the UK Government afford higher interest rates or rising bond yields?”
UK interest rate hike expectations
The Monetary Policy Committee of the Bank of England meets on Thursday, May 10 to decide the direction of interest rates.
Following a weak UK Q1 2018 GDP growth of only 0.1%, the slowest since Q4 2012 (read here) and inflation falling from 2.7% in February to 2.5% in March (against a Bank of England target of 2%), the market is now pricing in a 17% of a rate rise in May. The market had factored in a 100% chance of a hike just a few weeks ago.
UK 10-year bond yields fell 5bps during the week. The 10-year bond now yields 1.4% (up 0.32% over the past year)
UK households find themselves in a strange situation ten years on from the financial crisis. Interest rates have never been lower for both borrowers and for savers.
We assess the impact of potentially higher interest rates for households in the UK.
First, here are some household debt statistics, Continue reading “Impact of (potentially) higher interest rates on households in the UK”
The US government has around $20.5 trillion in debt and pays around $558 billion in interest payments a year (an effective interest rate of 2.72%).
Bond yields have been rising recently in the US on the back of a strong economy. The 10-year bond yield topped 3% (up 0.66% over the past year) recently, the highest since January 2014. The 2-year bond yield topped 2.5% (up a massive 1.18% over the past year), the highest since July 2008 (Read more here). Continue reading “Can the US government really cope with rising bond yields?”
The Greek stock market has been one of the best performing markets in the world over the past year. The Athens Stock Exchange General Index has returned 19% over the last year. But it has lost 85% (5334.5 to today’s close at 781.14) in value since October 2007. Continue reading “The Athens Stock Exchange General Index has returned 19% over the last year (but lost 85% since 2007); Australian interest rates are lower than that of the US for the first time in 18 years”
The US was not alone in hiking interest rates. The 6 other countries that hiked interest rates by 0.25% in line with the US were United Arab Emirates, Bahrain, Kuwait, Saudi Arabia, Hong Kong and Macau – all of which peg their interest rates in line with the one in the US.
Meanwhile Russia, Brazil, Mongolia, Tajikistan, Kenya, Serbia and Peru all lowered their interest rate.
Continue reading “7 countries hiked interest rates and 7 lowered interest rates in the past 2 weeks”
The Federal Reserve under new chairman Jerome Powell approved a 0.25% hike that puts the new benchmark funds rate at a target of 1.5% to 1.75%.
There was once a time when no one knew what to expect when Central Bankers met. Times have entirely changed, they are so predictable. Continue reading “As LIBOR moves upwards, Central Banks remain so predictable”
How often do analysts get the markets wrong? How often to fund managers get stock picks wrong? They get things wrong far more often then they get it right.
2017 was probably the worst year for hedge funds. And the start of 2018 isn’t turning out to be any better.
The problem probably lies with everyone focussing on the business cycle rather than the structural factors driving the markets. Continue reading “Markets should ignore cyclical factors and focus at the structural factors instead”