Tuesday 4th October 2022

[refitman]

Morning all.

[frog222]

Morning refit
A small laugh to start my day --

Bank of England used risky pension derivatives Staff retirement fund invested £4.2bn

Alex Ralph, Ben Martin, Patrick Hosking
Tuesday October 04 2022, 12.01am BST, The Times

The Bank of England’s own staff pension fund appears to have been a beneficiary of its £65 billion gilts market bailout last week as it emerged the scheme had more than £4 billion invested in the asset class at the centre of the crisis.

Like many traditional pension funds, the Bank’s scheme used so-called liability driven investment (LDI) funds to manage its risks and had placed almost £4.2 billion, or 82 per cent, of its money, with Legal & General, the leading LDI player in London.

The revelation came as attention focused on L&G, Insight Investments and Blackrock over their role in selling LDI products to pension schemes. Questions were being raised about whether they warned schemes sufficiently about the liquidity risk.

Jefferies yesterday warned L&G ran the danger of having its reputation for managing risk “discredited” by the turmoil. The investment bank estimated that L&G earned about £77 million a year in revenues from the products.

The Bank shocked the City last Wednesday when it announced a £65 billion Treasury-indemnified gilts-buying programme to try to put a floor under plummeting long-dated gilt values in the wake of Kwasi Kwarteng’s mini-budget. The aim was to halt a potential spiral or “doom loop” as pension funds were forced into asset fire sales to meet collateral calls on their LDI holdings.

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The intervention sent gilt values rallying and restored calm to the market. Gilts mostly rose again yesterday, although 30-year bonds, which are the focus of the bailout, fell slightly, their yield rising by 0.06 percentage points to 3.87 per cent.

The Bank said yesterday it bought £22.1 million of long-dated gilts, bringing the total purchased to £3.66 billion in the first four trading days of the stabilising operation.

The Bank declined to comment on whether the investments placed with L&G were leveraged and whether its scheme had itself been forced into asset sales to meet collateral demands by L&G, which has been the primary investment manager for the Bank’s pension fund since 2007.

The BoE has an eye-wateringly generous pension scheme, and like the others had to do everything it could to keep it topped up .

Became complacent after a decade of stable low rates , as did the whole shadow banking sector .

The fat lady has not sung yet

[frog222]

Shhh !

[frog222]

Switched off R4 some time ago

[RogerOThornhill]

Good morning.

Cabinet Government all going well and pulling in the same direction I see...

[frog222]

Good morning.
Cabinet Government all going well and pulling in the same direction I see...

@JohnRob14594924
""She might well be positioning herself as a moderately sane tory on the off-chance of yet another tory leadership in the not so distant future!""

Quite possible !

PS is Nokes in the cabinet , seems unlikely?

[gilsey]

Became complacent after a decade of stable low rates , as did the whole shadow banking sector .

The fat lady has not sung yet

Yes, some have suggested that the market for fixed-rate mortgages had got 'stuck' despite forecasts of rising rates for some time, the govt's f***-up just gave it a jolt in the direction it was going anyway.
Not ideal.

[gilsey]

“How is the government going to re-establish its financial credibility?,” Truss was asked on the Today programme.

'Credibility is like virginity, you can only lose it once'

John Major can vouch for the truth of that, and he had a lot more time before his next election.

[frog222]

Became complacent after a decade of stable low rates , as did the whole shadow banking sector .
The fat lady has not sung yet

Yes, some have suggested that the market for fixed-rate mortgages had got 'stuck' despite forecasts of rising rates for some time, the govt's f***-up just gave it a jolt in the direction it was going anyway.
Not ideal.

I was curious about why the brits seem hooked on what seemed to me to be shortish-term interest fixes on mortgages, checked on the system here for comparison --

There are a number of differences between French and UK mortgages. Below are a few examples:
Interest rates:
In France rates are set for a maximum 25 year term.
A fixed term of 5 years is more common in the UK.

I wonder how many brits do have longer term fixed rates , or is there some reason why not , such as banks not offering them ?

[AnatolyKasparov]

Good morning.
Cabinet Government all going well and pulling in the same direction I see...

@JohnRob14594924
""She might well be positioning herself as a moderately sane tory on the off-chance of yet another tory leadership in the not so distant future!""

Quite possible !

PS is Nokes in the cabinet , seems unlikely?

Nokes is a backbencher, and one of those fairly often mentioned when defections are rumoured.

[frog222]

"Trussterfuck" ™ John Crace

Kamikwasi Kwarteng delivers his excruciating career suicide note

Tactless jokes and half-arsed platitudes made up chancellor’s vapid Tory conference speech

https://www.theguardian.com/politics/20 ... icide-note

[gilsey]

I wonder how many brits do have longer term fixed rates , or is there some reason why not , such as banks not offering them ?

Banks don't offer them afaik. Not exciting enough for our 'dynamic' markets, maybe.


Certainly not as profitable for the intermediaries, all those fees when people remortgage. I'm not sure we ever had a fixed rate, they weren't as common in the past.

[gilsey]

Re Mordaunt, I hope/expect people are checking on how she voted when Osborne was freezing benefits.

[gilsey]

I wonder how many brits do have longer term fixed rates , or is there some reason why not , such as banks not offering them ?

Banks don't offer them afaik. Not exciting enough for our 'dynamic' markets, maybe.


Certainly not as profitable for the intermediaries, all those fees when people remortgage. I'm not sure we ever had a fixed rate, they weren't as common in the past.

It's actually a classic example of what Richard Murphy talks about in this thread



Warning - very long.

[AnatolyKasparov]

Re Mordaunt, I hope/expect people are checking on how she voted when Osborne was freezing benefits.

Well she (and other Tory MPs) would doubtless reply that then "it was different". I think we should take allies regarding this where we can find them.

[gilsey]

How was it different? What would they say the difference is?

We're supposed to believe there's a line in the sand some tories won't cross when it comes to making the poor poorer? It's been ok up to now?
If there is a line it's their constituency voters who've drawn it, sfa to do with their 'principles'.

[Sky'sGoneOut]

It's actually a classic example of what Richard Murphy talks about in this thread

That's a cracking thread from Richard Murphy. Thanks for posting it.

[Sky'sGoneOut]

Osborne froze benefit levels in 2016 and it was only in 2020 that they began rising again with inflation. So that's 4 years of no increase at all which is worse than what Truss is allegedly proposing. During that time did we hear a peep about it from Mordaunt, Buckland, et al? Did we fuck. These people are not my allies, their own voting records demonstrate unequivocally that they couldn't give a toss about benefit claimants. There's been no damascene conversion. This is all about political manoeuvring and self preservation. Whatever happens they'll be getting no thanks from me.

They may shackle Truss and tear their own government apart but they're doing it for themselves, not us.

[AnatolyKasparov]

Oh of course that all goes without saying.

[RogerOThornhill]

The Cabinet seems to be falling apart...

[Sky'sGoneOut]

Oh of course that all goes without saying.

Well you did say we should take them as allies and I have no intention of allying myself with the likes of *checks notes* David Frost.



Truss really is doomed isn't she, never mind days or hours it's getting worse for her by the minute.

[RogerOThornhill]

And a sharp intake of breath from everyone who fought against the selling off of Channel 4...amazing how someone can be right, and a stonking great hypocrite at one and the same time.

[AnatolyKasparov]

I didn't mean "allies" in that sense. More like WW2 sort of stuff

[Sky'sGoneOut]

I didn't mean "allies" in that sense. More like WW2 sort of stuff

Given how the Molotov–Ribbentrop pact ended for both parties that's still a no from me .

[Sky'sGoneOut]

Oof!

[frog222]

Yelland -- "It all goes back to Brexit"

[Sky'sGoneOut]

Walking home tonight in Leeds = t-shirt weather.

[Sky'sGoneOut]

Been to the pub with a few lefties, a couple who run a foodbank for refugees, another couple who do art therapy for disabled kids, worthy and admirable people all.

Half of them won't vote Labour under Starmer, they think Corbyn was crushed by a vast conspiracy (partly true) and a centrist Labour party will be no better than the Tories.

Being a guest I was polite until about the sixth pint and a sneaky G&T then I made myself unpopular by opening my mouth.

[Sky'sGoneOut]

Fuck them, they're perfectly welcome to waste their vote on the Socialist Green Alliance while the rest of us hold our nose, bitch and moan, then vote Labour. I might not like it but given the alternative we don't have a lot of choice.

At least as far as I can see it right now, however I'm aware I said otherwise just recently and tomorrow is another day.

[Sky'sGoneOut]