“There was a concern amongst bond investors that this unfunded tax cut and energy intervention meant that the price that the bond market would demand to lend money to the UK government, which is essentially what a bond is, needed to be higher. Perhaps what the government misjudged is that just like in a corporate bond market, or any other asset class, you need to incentivise investors to buy your securities. The UK government announced a number of packages mainly to support the energy crisis, capping energy prices for consumers, and a number of tax cuts as well, which led to an increase in the deficit.
I guess it all started with the ‘mini-budget’ (as it's being referred to in the press here). We’ve lived through volatility before, but it felt this was self-inflicted by a major government, and I think the one thing that surprised people was some of the ripple effects into other markets as a result of the challenges that the UK faced.” How did it unfold?Īndy Chorlton: “I've never seen anything like it in a government bond market, certainly in a developed market.
So what's the last week been like for you as an investor in bond markets?Īndy Chorlton: “The best word to describe it is ‘bruising’. To understand exactly what followed in the bond markets, and where that now leaves investors in terms of risk and opportunities, we spoke to Andy Chorlton, Schroders’ Head of Fixed Income. Also while febrile markets are anxious to gauge whether inflation is showing signs of ebbing away – or becoming more entrenched.
This emerged while the Bank of England, the Federal Reserve (Fed) and European Central Bank (ECB) are all at various stages of raising rates and tightening policy. Two weeks ago the UK government unveiled its so-called “mini-budget”, seeking to increase the UK’s deficit but offering little detail to support its plan. New shows drop every Thursday at 5pm UK time. You can also subscribe to the podcast via Apple, Spotify, Google or wherever you get your podcasts. You can listen to the Investor Download with Andy Chorlton by clicking the play button at the top of the page.
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