Finance

Britain’s long-term borrowing costs are nearing their highest level since 1998 amid fears that Rachel Reeves is failing to balance the public finances.

The yield on 30-year UK gilts – a benchmark for the cost of servicing the national debt – jumped as much as nine basis points to 5.63pc on Tuesday, close to a 27-year high.

This reflected the biggest daily increase of any major global economy, as economists warned that Britain was paying a “moron premium” on its debt – a phenomenon whereby investors charge countries more to borrow because of previous policy missteps.

Well, sorta and only just.

Real interest rates aren’t that far off other places. It’s that inflation here is higher. Which is the past policy mistake of course.

Not according to Miran, who suggests that foreigners could be taxed on their holdings of US Treasuries to lessen their attractions to overseas investors, never mind that this would be both a technical and legal default.

That’s a err, brave position to take.

“Which is probably why Academics are reacting so desperately and so foolishly to the existence of chatGPT and other LLMs. They’re desperately trying to prevent people from using the tools in the hope that this will keep up their social status. But this is a doomed enterprise. The mere fact that the statistical text generator can get excellent grades means that the grades are no longer worth more than the statistical text generator.”

To change the example a bit, the entry level – and bread and butter scut work when you were on your uppers – in financial journalism was company reports. “SpudIndustries showed revenue growth from YouTube but analysts worry about credibility” etc. 300 words and there are 4,000 companies on the US markets. 10 per working day -ish. 30 to 50 outlets needed that sort of scut work done. In modern money you might get £30 per piece. You know, -ish, -ish. It was a vast sea of boring low paid work.

Doesn’t exist now, not in the slightest. You can’t get £1 for such a piece. Even if you set up an AI to write it for you then publish it on the net you’ll not gain £1 in ad revenue from it. It’s so cheap to produce it’s not worth even the £1.

You do still get paid for opinion, for analysis (actual analysis that is, here’s why I don’t believe the statistical numbers sort of analysis). Because that’s something different. Can’t, for the life of me, think why academia should be different.

Donald Trump has suggested Jerome Powell could be sacked for fraud as pressure builds on the Federal Reserve chairman over a multi-billion dollar renovation of the central bank.

Following reports that Mr Trump was preparing to oust the Fed chief, the president told reporters: “I don’t rule out anything but I think it’s highly unlikely unless he has to leave for fraud.”

Twisting what he said there more than a bit, no?

But this couild also apply to that of others:

British gilts are the most undervalued financial asset on the planet. You would hardly know it from our compulsion to talk the country down but the UK is today one of the least indebted states in the rich world.

There’s contrarian and then there’s contrarian.

His point is that corporate and household debt is down – which it is. But that doesn’t make gilts a bargain….

The Bank’s unwinding of its money-printing programme has come under increasing scrutiny owing to estimates that it could cost the taxpayer up to £150bn.

The Telegraph revealed that Richard Tice, Reform’s deputy leader, wrote to the Bank last month, accusing Threadneedle Street of prioritising bank profits over the interests of working people.

Mr Tice said the unwinding of this programme, known as quantitative tightening (QT), was pushing up borrowing costs and piling pressure on the public finances.

Yes, that’s the point. To push up borrowing costs. QE was to push them down, QT to put them back up again.

There are no such safety nets to support the UK. Bullies tend to pick on the weakest, and the international bond market is perhaps the biggest bully of the lot.

The gond markets are not bullies. There are no bond vigilantes. There are simply investors – individual, collective, corporate – who look at the price of gilts and think “Know what? We don;t want to buy that. Ta!”

The FTSE 100 index of the most valuable companies on the London Stock Exchange has soared to a record high as investors shrugged off concerns over Donald Trump’s trade wars.

The FTSE 100 had the 9,000-point mark in its sights on Thursday, as it climbed to 8,979 points, above its previous all-time high of 8,908 points.

Stock market indices are not inflation adjusted. It’s still 750 points below Sept 2019…..when inflation adjusted.

Thames Water’s bonds have crashed to a record low after the Environment Secretary said it was stepping up contingency plans for the struggling utility giant.

The price of Thames Water’s debt fell to as low as 67p on Friday, down from 70p at the start of the month, as investors took flight amid fears the Government could nationalise the business.

3% is a crash.

In something as illiquid as corporate bonds.

A special administration regime (SAR) would wipe out the bulk of Thames Water’s borrowings, although it would also leave the Government forced to foot the bill for its running costs.

You know what? It wouldn’t. The cram down would be of that debt which cannot be repaid. Not of all debt, but of that which it impossible to repay. Because a cram down of more than that would be straight out theft.

Further, the Tele here – and I suspect the conversation more generally – is missing the vital distinction between Thames Water debt – the regulated utility – and Kemble Water debt, the unregulated holding company. Kemble might well be toast. But that doesn’t wipe out the debts of the opco…..

As Stephen Miran, the head of Trump’s council of economic advisers, has suggested, this might be achieved by imposing a withholding tax on income generated by US assets, or by converting foreign holdings of US Treasuries into 100-year bonds.

Either or both are – effectively, even if not in law – default.

Jeebus.

The downgrade sent the benchmark S&P 500 as much as 1pc lower in early trading, while the tech-heavy Nasdaq Composite sank more than 1.4pc.

This led to the likes of Tesla and Apple falling by 4.8pc and 3.3pc, respectively, although they later trimmed the scale of their losses.

Might it be that it was falls in Apple and Tesla which reduced the indices?

When interest rates were at record lows of 0.1pc during the pandemic, the Bank earned far more on the returns from government bonds than it had to dish out in interest.

By the end of 2021, the Old Lady was in profit to the tune of £123.9bn.

But that was quickly eroded when interest rates started rising, with a “consistently higher Bank Rate” resulting in “large interest losses” of £18.5bn in the last financial year alone, according to the Office for Budget Responsibility (OBR).

But that’s not all. The Bank is also actively selling its stockpile of gilts back to the market in a move called quantitative tightening (QT), crystallising billions of pounds of losses for the taxpayer.

Many economists, politicians and central bankers believe this is a mistake, as it means that some of the bonds Threadneedle Street bought during the crisis are being sold at knockdown prices.

In some of the most extreme cases, bonds bought for the equivalent of £1 have been sold for 28p.

These so-called “valuation losses” will dwarf the money being paid out in interest if the Bank continues to actively reduce its stockpile of gilts by around £48bn a year.

No. By definition the valuation losses equal the interest losses over the term of the bonds. Because that’s what is driving the current low capital values of the bonds – that their coupon is lower than the general interest rate.

That’s what the crystallising is – losses which are going to happen anyway are being crystallised into a current capital loss, today, rather than being an interest loss over the years.

The total cost to the taxpayer over the scheme’s lifetime is currently estimated at around £150bn by both the Bank of England and OBR. That’s the equivalent of a £5,000 tax on each household.

All of which is an interesting lesson for the MMT enthusiasts, no? We did just print money and go spend it. And look how cheap that is!

Homeowners aged 60 and over are sitting on a record £2.95 trillion worth of property, with 98 per cent of this mortgage-free, according to an analysis that lays bare the extent of the UK’s generational housing divide.

The calculations, by the estate agency Savills, showed £2.89 trillion of mortgage-free property being held by over-60s who were residential homeowners and only £60 billion worth of mortgages, 2 per cent of the total value of their homes.

The under-45s had £1.56 trillion in property of which 47 per cent, or £734 billion, was held in mortgages.

The indebtedness increased sharply the younger the homeowner became: the under-35s had £600 billion worth of property, with a total of £300 billion of mortgages outstanding.

Younger folk have mortgages, older folk don’t.

And?

Two little-known Wall Street companies experienced an “unusual” stock price surge before an announcement naming Donald Trump’s sons to the board, raising fears over potential insider trading.

Shares in drone maker Unusual Machines, which listed on the Nasdaq last year, surged by more than 220pc in the four weeks leading up to the recruitment of Donald Trump Jr on Nov 27.

Meanwhile, shares of fintech group Dominari Holdings, which is headquartered in New York’s Trump Tower, were catapulted 580pc higher in the six weeks before bosses announced Donald Trump Jr had joined its advisory board.

Eric Trump, another of the US president’s sons, joined at the same time.

As ever, check short dated out of the money options trading.

Because, yes, there are still insider traders dim enough to do their trading that way…..in the first place everyone would look.

Russia’s rouble has become the world’s best-performing global currency as Donald Trump’s tariff war upends financial markets.

The rouble has strengthened 38pc against the dollar since the start of the year, according to data compiled by Bloomberg, following a dramatic fall in confidence in the US currency.

I’d not put all that much weight behind the performance of something that’s not wholly and freely convertible.

Meanwhile, the rouble has been buoyed by record-high interest rates of 21pc as the Bank of Russia battles to temper inflation and support Vladimir Putin’s struggling war economy.

Also, over time, FX will follow relative inflation rates. So don’t expect it to last all that long….

Nasdaq call volumes spiked in the hour before Trump unveiled his turnaround, as traders bought the right to purchase shares at a certain price.

Unusual Whales, a research firm that tracks market data, said that some of the trades were what is known as “zero DTEs”, meaning zero days to expiration.

An analyst at the firm said: “These options, as the name implies, expire the same day as purchase, making them much riskier than farther-dated options. The sharp increase in equities [last night] created exponential gains for those correctly positioned.”

If you are going to insider trade then don’t do it in out of the money short dated options. Because you will be found out if you do that.

Not that anyone did insider trade, obviously:

It comes after Trump wrote “THIS IS A GREAT TIME TO BUY” on his Truth Social website just hours before his tariff climbdown led to the S&P 500 posting its biggest jump since 2008.

That’s public information. Anyone trading upon that could be a risk lover, a gambler, a loon, but not an insider.

After 15 years of post financial crisis status quo, the pandemic forced them out of their slumber and into action. The Bank of England was widely praised for its decisiveness in slashing borrowing costs as Covid crushed household spending.

But Threadneedle Street was just as deservedly lambasted for its pedestrian response to the inflationary shock that followed the end of lockdown and Russia’s invasion of Ukraine.

The meltdown on global markets is a chance for the Bank and its overseas counterparts to redeem themselves by stepping in to constrain investor panic.

An extraordinary $9.5 trillion (£7.4 trillion) has now been wiped off stocks in the three days of trading since Donald Trump declared economic war on the rest of the world.

FTSE on the morning of publication of this stirring call to arms:

No one does believe that an Associate Editor of the Daily Telegraph moves markets in that way.

One of the grand financial blunders:

It marks the latest twist in the career of Mr George, who is best known for cashing in on “golden ticket” life insurance contracts sold by Aviva France.

Under the terms of these ill-conceived contracts, which he first received from his father aged seven, customers could trade funds based on last week’s prices.

Not only did this allow contract-holders to back-pedal on significant price swings to avoid losses, but it also meant they could switch to rising assets based on historical prices.

Either way, profits were guaranteed as long as they acted within a week.

Can’t recall quite why they were set up this way. Think it was pre-internet age, published prices, writing letters to shift funds. That sort of thing.

But th effect was that you had a life insurance contract which was really a savings vehicle. OK. You could shift funds around between investments within the contract OK. So, there had to be some method of publishing the prices at which you could trade by letter (I think that last is right). So, Aviva allowed you to trade this week based upon last week’s published prices. Coah and horses was driven through this idea.

A French entrepreneur who built his fortune from lucrative life insurance contracts has launched a new fund to invest billions of pounds in Britain.

Max-Hervé George, 35, is preparing to buy swathes of data centres across the UK, buoyed by the Government’s push to rip up planning rules and turbo-charge artificial intelligence.

And, well, yes. He might be a remarkable entrepreneur. But so far – at least as far as I know – the evidence of his ability is that he can trade this week on last week’sprices. Which isn’t a wholly informative track record…..

An analyst has been accused of using working-from-home rules to make nearly £1 million from insider trading.

Redinel Korfuzi, 37, a former Janus Henderson research analyst, denies money laundering and conspiracy to commit insider dealing.

OK, naughty boy etc etc.

They are said to have netted £963,000 in relation to 11 companies’ shares including Daimler, Jet2 and THG and Russian tech firm Mail.ru, now known as VK. Mr Korfuzi is accused of misusing confidential information on these companies.

Jamie Ross, who worked with Mr Korfuzi at Janus Henderson on European equities, …………The fund manager was then taken through a list of the potential transactions through which Korfuzi is said to have profited through confidential information.

Asked about a transaction involving Mail.ru, a personal email service, between September 22 and October 2, 2020, Mr Ross said he had “initial interest” in the transaction but “would have quickly lost that interest when I found out the aim of the company”.

Mr Forster asked: “In terms of Mr Korfuzi’s interest, would you have expected him to show much interest in this, in your view of it?”

Mr Ross replied: “It would have been very clear to him this was not something I would have sanctioned, and was an investment I would not have been interested in.”

The prosecutor then asked Mr Ross about a transaction involving Jet2, between February 4 and February 12, 2021. Mr Ross replied that Janus Henderson did not have a position on the package holiday company, adding that the proposed transaction would not have interested him at all.

Yes, of course this is all going to be more complicated etc. But so far the coworker/manager seems to be saying that whatever he did with those two companies wasn’t insider – or at lesat, not abuse of the Janus position because they didn’t have an interest.

So, you all do take my investment advice, yes?

A 110% rise on a 20 day old stock tip. Woot!

Be even better if I’d got the reason right of course. This isa takeover bid, not as I suggested a rise in the price of steel scrap in the US due to tariffs…..