Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

U.K. Government Bonds, Gilts Ahead of the Pack

Interest-Rates / UK Debt May 21, 2010 - 04:32 AM GMT

By: Seven_Days_Ahead

Interest-Rates

Best Financial Markets Analysis ArticleWe wrote a Market Update on the day of the UK General election outlining 3 possible scenarios for the Gilt market post-election.

We noted how we thought the market would rally on two of the possible outcomes:


  • An outright Conservative victory, or
  • A conservative led coalition with an overall majority.

In the event, the second outcome occurred and the Gilt has indeed rallied. The coalition Government has put fiscal consolidation at the centre of their agreed program. This makes the UK the only major economy with a coherent, coordinated and credible plan to fast track cuts to the budget deficit and public spending.

Although the previous administration also planned to cut the deficit, their plans lacked credibility and the time-frame was probably over too long to prevent either

  • the markets from losing confidence, or
  • prevent the rating agencies from cutting the UK’S AAA rating.

The new government’s fiscal plans also underscore the Bank of England’s stance on official interest rates. Last week’s quarterly inflation report forecast inflation would fall back below target based on the current level of Bank rate and existing deficit-reduction plans.

With the deficit now set to be cut faster, the Bank will leave short term interest rates at current levels for an extended period allowing the yield curve to flatten.

But these are not the only reasons for the rally in Gilts. Government bond markets have turned decidedly bullish in recent days as traders continue to worry about the Sovereign debt crisis in the Euro zone.

Although peripheral countries are taking steps to cut both spending and their budget deficits, the fear is now that the medicine is so severe that it risks forcing a dip back into recession. The mood hasn’t been helped by Germany’s decision to unilaterally ban naked short-selling in 10 of its key financial stocks and Euro denominated government debt.

In short, the fragmented nature of policy making in the Euro zone led to the initial lack of confidence that first hit Greece, now that fragmentation has been re-enforced by recent German actions: the Euro zone has one monetary policy, but multiple fiscal and political decision centres which have caused the fault lines now so evident.

How has this helped the Gilt?

Quite simply, the Gilt is now seen as a safe haven trade, along with the Bund and US Treasury market and because of the new government’s plans it is leading the pack. 

The Technical Trader’s view:

 

 

MONTHLY  CHART

This market is undeniably well-structured: note well the support from the 1994 High at 105.03, see how well it performed on successive bear attempts  - total four …

The note the creation of a bull falling wedge in the last week.

The minimum target of that wedge is surely the Prior high at 124.95…

 

WEEKLY  CHART

The detail of the bull move – and the completion of the falling wedge.

The first point of reference is the old High 120.82, but then 125.58.

 

On any pull back expect the diagonal at 117.00 to be good support.

Mark Sturdy
John Lewis

Seven Days Ahead
Be sure to sign up for and receive these articles automatically at Market Updates

Mark Sturdy, John Lewis & Philip Allwright, write exclusively for Seven Days Ahead a regulated financial advisor selling professional-level technical and macro analysis and high-performing trade recommendations with detailed risk control for banks, hedge funds, and expert private investors around the world. Check out our subscriptions.

© 2010 Copyright Seven Days Ahead - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Seven Days Ahead Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Dr Ray
22 May 10, 05:41
Gilts ahead of the pack

Why is the £ almost the only major currency to fall relative to the Euro if faith in the £ has been restored as you imply?


Nadeem_Walayat
22 May 10, 08:20
Pound / Euro

Fall ?

The Pound has RISEN against the Euro from 1.10 6 months ago to 1.15 last.


phil eagle
22 May 10, 13:34
Pound/Euro

My call is that the Pound will buy 1.25 Euros before christmas 2010...


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules