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July 01, 2009

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aje

Either that or markets have anticipated a chance in government... (!)

Falco

The data are also consistant with - though not proof of - the hypothesis that foreign investors can see that there is less than a year of spendthrift governance left and that sanity is likely to be restored at the next election.

Recusant

The data are also consistant with - though not proof of - any damned theory you care to come up with.

Osborne may be a prat, but give me a prat against the semi-treachorous tribalists, Brown and Balls. Darling doesn't count, because he has clearly been removed from any position of influence.

pablopatito

Osborne was a prat for suggesting the likelihood of a run on the pound, even if he believed it (which I doubt). It seems very inappropriate for a man in his position to make such comments for political gain.

Cityunslicker

Q2 figures a bit more interesting now that we have QE buying most of the Government debt. Crowding out foreigners and everyone else, if that is the correct phrase.

How we avoid a currency event is beyond me, if only I could predict exactly when.

JimH

So foreigners bought £5.9bn worth of gilts in Q1 then. Considering we've got to get rid of approx. £200bn of them over the next year, not a massive vote of confidence really is it? Plus how many of those £5.9bn were, or will be, passed on to the BoE and its magic money producing computer? And what happens when it gets turned off (if it ever is)?

There is only one thing stopping the bond market calling time on Gordo and chums, and that is they think the Tories will get in next year and take all the 'hard decisions' that Labour keep banging on about, but always flunk. If there is so much as a peep that the Tories won't get power next June the markets, the pound and the bond market will all turn south faster than you can say International Monetary Fund.

Shuggy

"The data, then, are consistent with - though not proof of - the hypothesis that Osborne is a prat."

No, the proof of that lies elsewhere. Thing is, it doesn't matter that he was wrong since no-one will remember him saying it - but they would have if he'd been right. There is always the possibility that Osbourne was aware of this. But in general Tories don't seem to be that interested in economics anymore. I was wondering why you thought that was Mr D? They used to be. They were often *wrong* about it but that's a different matter.

chris

@Shuggy - Before the late 60s/early 70s the Tories were as ignorant of economics as they are now. Wilson was, by the low standards of his day, a vastly better economist than Home or Macmillan. I suspect the economic expertise in the 45-51 government far eclipsed that of the opposition. And the IEA, in its early years, struggled to get interest from the Tories.
As for what piqued the Tories interest in economics in the 70s, a friendly reading would say that rising inflation led to an interest in monetarism, an unfriendly one that a desire to defeat a militant working class turned their attention to economics.
With monetarism now unfashionable, and the wroking class subdued, both motives have passed, and the Tories have returned to their prelapsarian innocence.

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Andrew Duffin

The data are also consistent with - though not proof of - the hypothesis that the shit has not quite hit the fan yet.

If it even looks possible that Labour might win the next election (which currently it doesn't, at least to foreign observers), then gilt auctions will fail alright. And our debt will be downgraded.

Confidence is what's driving this market at present - confidence that the current disaster of a government is nearly on its way out.

jameshigham

Osborne should do more talking down like that then.

chris

Gentlemen - if it is the prospect of a Tory government that's supporting sterling and gilt yields, why did Osborne warn of a run on the pound?

diogenes1960

the underlying message that worries me is that the Left has not lost faith in keynesianism depsite the fact that the events of the 70s and 80s - inexplicable in keynesian terms - should have downgraded its value to that of astrology or haruspicating.

DBX

It's simply proof that people see government bonds as a safer investment for now. You've seen the same thing in the US; it's a place to park your money until future trends become a bit clearer. The fact that George Osborne is a prat isn't really relevant, especially in view of the fact that this particular remark of his makes sense **in the long term**.

Guido Fawkes

I have been play Gilts from the short side, which is fun though a little whippy. I think when QE unwinds George will be proved right. As in many things timing is everything - in this case the time frame. The gilt market will plunge, yields will rocket and sterling will be under pressure if foreign investors flee gilts. The Yanks could be in the same boat if their reserve currency status is diminished.

So EUR and CHF for me.

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And a lot of it reflects a switch from bank deposits to securities; foreigners “other investments” in the UK, mostly bank deposits, fell by £143.2bn in Q1. And of course there’s no guarantee such buying will continue.

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