Daily Brief – UK Interest Rates

UK Interest Rates

Instructive that rate cuts of 100bps in short term UK interest rates in 2024 resulted in 10 Year Government Bond yields rising by exactly 100bps from 3.6% to 4.6% to the levels last seen after short lived PM Liz Truss’ ill-fated foray into the world of market economics with her September 2022 budget. With 4 UK rate cuts totalling 100bps forecast in 2025 it looks unlikely that a similar reduction in 10 year yields will follow those short term rate cuts given that investors increasingly are exerting their price for financing the large and growing UK government borrowing requirement.

GBP/USD 1.2404.

China

With all eyes on what China’s government will approve in March with respect to the size of the fiscal stimulus appropriate to what is required to jump start the Chinese economy. The reason for the appropriateness comment is due to the still unknown quantum of the tariffs that incoming President Trump will impose on China. Sanguine but optimistic sounding China watchers believe that Trump has managed expectations on the high side for the scale of those tariffs and will then scale them down when it comes to it. China normally approves a budget deficit limit of 3% of its GDP but this time China is reported to be considering increasing that limit to 4%.

EUR/USD 1.0326.

UK Equities

The top of the FTSE 100 Index in 2024 turned out to have been in May, so if you had sold in May and gone away as the old adage suggests you would have been right but unless you had invested the proceeds in Bitcoin or USD the wonder performers of 2024, you would have missed out on participating in a share market that is still estimated to be 40% undervalued versus its true value due to the UK discount applied by the market in the absence of a positive government led investment environment and due to its perceived isolationist status.

GBP/EUR 1.2011.

European Property Yields

UK investors tired of ever dwindling yields on their property investments might want to cast their eye over what is available in Europe. Top of the table is Riga, Latvia which offers a rental yield of 8.47% to more adventurous investors but nearer to home is Dublin offering 6.83%.

EUR/JPY 162.08.

The Bay City Rollers

Pinching myself for writing those 4 words but the only noteworthy anniversary in the arcane world of pop and rock on this day was in 1976 when the lads had their hit with Saturday Night when it went to Number One in the USA . And that is the key point: quite what the US market made of the sartorially challenged Scots band The Bay City Rollers has been lost in the mists of time, but obviously those plaid (tartan) trews were sufficient to attract attention rather more than the lyrics:

S-A-T-U-R-D-A-Y night!
S-A-T-U-R-D-A-Y night!
S-A-T-U-R-D-A-Y night!
S-A-T-U-R-D-A-Y night!

Gonna keep on dancing
To the rock and roll
On Saturday night, Saturday night
Dancin’ to the rhythm
In our heart and soul
On Saturday night, Saturday night

I-I-I-I
Just can’t wait
I-I-I-I gotta date

At the good ol’ rock and roll
Folk show, I’ve gotta go!
Saturday night
Saturday night

Etc……

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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