Latest news with #gilts
Zawya
3 days ago
- Business
- Zawya
Sterling tiptoes lower; 40-year gilt auction, BoE speakers in focus
The pound trod water on Tuesday, holding mostly steady against the dollar and the euro, ahead of a raft of Bank of England speakers and an auction of long-dated government bonds that may offer a gauge of investor confidence in Britain's finances. Sterling was last down 0.15% against the dollar at $1.352, near last month's more-than three-year highs. The euro was also stable against the pound at 84.45 pence. Investors are torn between having to navigate the turbulence across markets stemming from the U.S. administration's erratic tariff policies and growing concern about the long-term finances of developed economies. Long-dated bonds in the United States, Japan and the UK in particular have been punished hard, which has pushed yields up sharply. In the case of the UK, 30-year gilt yields are the highest among developed economies, at 5.36%. Their extra premium over 30-year U.S. Treasuries, which are yielding some 5%, is not the result of better growth expectations, but of more precarious financing, which has stirred up extra volatility for the pound. On Tuesday, British 30-year government bond yields fell to a four-week low of 5.341%, down 7 basis points on the day and slightly outperforming U.S. Treasuries ahead of the auction of 1.25 billion pounds ($1.69 billion) of 2063 gilts. Bank of England Monetary Policy Committee member Catherine Mann suggested late on Monday the central bank should reconsider the pace at which it sells gilts, as the rise in long-dated yields could not be adequately offset by cutting rates faster. Strategists at RBC said Tuesday's bond auction was small by historic standards, which should boost demand, although they were less attracted by the longer-term prospects for the bond due to the prospect of more supply in that maturity bracket. "In the lead up to the UK's bond auction, UK gilts are outperforming across the curve and yields are falling. This suggests that bond vigilantes are out of sight for now, and that the bond market is not expecting any problem in today's auction," XTB research director Kathleen Brooks said. In domestic news, Thames Water, Britain's biggest supplier, said on Tuesday that U.S. private equity firm KKR had pulled out of a multi-billion pound rescue plan, reigniting fears the company will need to be nationalised to avoid financial collapse. The government has said it is on standby in case Thames Water fails to recapitalise and needs to go into temporary nationalisation to keep services running. BoE Governor Andrew Bailey, Deputy Governor Sarah Breeden, Mann herself and external MPC member Swati Dhingra are due to appear before a parliament committee at 0915 GMT.
Reuters
3 days ago
- Business
- Reuters
Sterling tiptoes lower; 40-year gilt auction, BoE speakers in focus
LONDON, June 3 (Reuters) - The pound trod water on Tuesday, holding mostly steady against the dollar and the euro, ahead of a raft of Bank of England speakers and an auction of long-dated government bonds that may offer a gauge of investor confidence in Britain's finances. Sterling was last down 0.15% against the dollar at $1.352, near last month's more-than three-year highs. The euro was also stable against the pound at 84.45 pence. Investors are torn between having to navigate the turbulence across markets stemming from the U.S. administration's erratic tariff policies and growing concern about the long-term finances of developed economies. Long-dated bonds in the United States, Japan and the UK in particular have been punished hard, which has pushed yields up sharply. In the case of the UK, 30-year gilt yields are the highest among developed economies, at 5.36%. Their extra premium over 30-year U.S. Treasuries , which are yielding some 5%, is not the result of better growth expectations, but of more precarious financing, which has stirred up extra volatility for the pound. On Tuesday, British 30-year government bond yields fell to a four-week low of 5.341%, down 7 basis points on the day and slightly outperforming U.S. Treasuries ahead of the auction of 1.25 billion pounds ($1.69 billion) of 2063 gilts . Bank of England Monetary Policy Committee member Catherine Mann suggested late on Monday the central bank should reconsider the pace at which it sells gilts, as the rise in long-dated yields could not be adequately offset by cutting rates faster. Strategists at RBC said Tuesday's bond auction was small by historic standards, which should boost demand, although they were less attracted by the longer-term prospects for the bond due to the prospect of more supply in that maturity bracket. "In the lead up to the UK's bond auction, UK gilts are outperforming across the curve and yields are falling. This suggests that bond vigilantes are out of sight for now, and that the bond market is not expecting any problem in today's auction," XTB research director Kathleen Brooks said. In domestic news, Thames Water, Britain's biggest supplier, said on Tuesday that U.S. private equity firm KKR (KKR.N), opens new tab had pulled out of a multi-billion pound rescue plan, reigniting fears the company will need to be nationalised to avoid financial collapse. The government has said it is on standby in case Thames Water fails to recapitalise and needs to go into temporary nationalisation to keep services running. BoE Governor Andrew Bailey, Deputy Governor Sarah Breeden, Mann herself and external MPC member Swati Dhingra are due to appear before a parliament committee at 0915 GMT.
Yahoo
5 days ago
- Business
- Yahoo
The bond market: a once-in-a-decade opportunity to lock in passive income?
Bonds have long been a cornerstone for investors seeking steady, predictable passive income. But with yields at multi-year highs, the bond market is now offering a rare chance to lock in attractive returns with relatively low risk. This combination is drawing new attention from UK investors. A bond is essentially a loan an investor makes to a government or corporation. In exchange for the money, the issuer promises to pay the bond holder regular interest (known as the coupon) and to return the original investment (the principal) when the bond matures. Bonds are considered fixed-income investments because they typically pay a set interest rate over their life, making them a popular choice for those seeking reliable income streams. The appeal of bonds for passive income is straightforward, especially now. For example, UK government bonds (gilts) are currently offering yields not seen in over a decade. The 10-year gilt yield stands at around 4.65%, while the 30-year yield is just over 5.4%. This means that if someone were to invest £10,000 in a 10-year gilt, they could expect to receive £470 per year in interest — more than double what they would have earned five years ago. The only significant risk is if the UK government were to default on its obligations. However, this is widely considered extremely unlikely, making gilts far less risky than most stocks. Across the Atlantic, US Treasury bonds are also offering attractive yields. The 10-year US Treasury yield is currently about 4.46%, and the 30-year yield is just under 5%. These rates are historically high for such safe assets. This higher-than-usual yield reflects near-term economic uncertainty and Trump's plans for potentially unfunded tax cuts. But it also offers investors a rare window to lock in high passive income for years to come. For those willing to look further afield, some overseas bonds offer even higher yields, especially in emerging markets or countries facing economic challenges. While these can provide eye-catching income, they also come with increased risk, including currency fluctuations and the potential for default. For example, the South African 10-year bond yields over 10%. Bond investing might not be for everyone. And thankfully lots of stocks offer exposure to the bond market. One of the best known is Berkshire Hathaway (NYSE:BRK.B) which offers partial bond market exposure due to its massive holdings in US Treasury bills, which provide steady interest income and stability. Berkshire now holds over $300bn in US Treasurys — accounting for nearly 5% of the entire market for short-term government debt. While Berkshire is a conglomerate, its defensive cash position, debt holdings, and diversified business operations help buffer against market volatility, offering shareholders indirect benefits from bond market returns. However, this Warren Buffett company is not a direct substitute for bond funds, as most of its value comes from operating businesses and a concentrated equity portfolio, not fixed-income assets. And while the company has performed well in recent years, there's going to be some uncertainty for this US-focused business going forward. It's a stock I own and recently bought more of, but I appreciate that Trump's policy may cause some volatility. Also, it doesn't pay a dividend, so there's no yield — just growth, hopefully. The post The bond market: a once-in-a-decade opportunity to lock in passive income? appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool James Fox has positions in Berkshire Hathaway. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025
Bloomberg
30-05-2025
- Business
- Bloomberg
Looming BOE Decision Casts £4 Billion Shadow Over UK's Budget
A decision that the Bank of England has to make in the next few months is posing a £4.3 billion ($5.8 billion) threat to Chancellor of the Exchequer Rachel Reeves' spending plans. By September, the BOE will announce the pace at which it will offload the gilts it owns next year under so-called quantitative tightening. The central bank has been shrinking the portfolio by £100 billion ($135 billion) a year but pressure is mounting to scale back the run-off amid strains in the UK government bond market.
Bloomberg
21-05-2025
- Business
- Bloomberg
Britain's Borrowing Strategy Needs an Overhaul
A successful 30-year £4 billion ($5.4 billion) syndicated sale of gilts on Tuesday doesn't mean all is sunny with long-dated UK debt. Demand of £75 billion for this new issue offering a juicy 5.4% yield masks a disturbing softening in structural appetite for ultra-long duration debt — the foundation of Britain's borrowing strategy. Bluntly, higher yields are failing to attract alternative buyers, and domestic funds already have sufficient portfolio duration.
