If the interest rate falls, and the biggest bond broker in the UK – Pimco – suggested this week that they really should fall to between two and three per cent
Reader: No, they don’t.
As for the policy rate, our internal models point to a neutral interest rate of 2 to 3 per cent in the UK.
They say that – in their expectation – the policy neutral rate will be 2 to 3%. The policy neutral rate and the actual rate set by policy are not the same thing.
Sigh.
Referring to PIMCO as a ‘bond broker’ might be the most actionable thing he’s said in years.
Until people started pissing about, the Bank of England base rate was 5% for a couple of centuries. So, we are *now* in the realm of “normal” rates. The base rate is *NOT* high, it is *normal*. “High” is the 10%-15% between 1975 and 1995.
Someone who appears knowledgable has now pointed out to him that under the proposals pension funds will need to closely match assets and liabilities to lock in the surplus, but he is claiming that is impossible to immunise assets and liabilities against interest rate changes.
“And you clearly do not understand pensions if you think matching liabilties in this case is independent of interst rates. That is a quite extraordinarily stupid comment.”
As always, not only is he an abusive c*nt, he is also totally wrong.