Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
No Keith that is wrong. Peter is telling you facts not opinion.
Osborne was wrong to place a massive emphasis on just retaining the AAA rating, specially as it is not under his control and the economic inheritance he had made its retention somewhat dubious anyway. Politician talk is not good economic talk. As Peter said, the damage was done when the AAA rating went to a negative outlook as bonds are being priced accordingly. Right now though, the interest paid by the government on UK bonds still look a significantly better bet than most other developed countries largely because Osborne's economic strategy. This is important because these bonds are funding the deficit.
Government bonds (also known as gilts) are meant to provide a 'safe haven', exceptionally low capital risk for which you get a defined but low, known, interest rate. These are often used in portfolios to provide bottom end protection or to cover known risks, 15 year gilts are used to establish and underpin annuity rates. These bonds have a capital value and are traded on the markets.
Investors buy these bonds and judge their worth based on a risk/return calculation. Duration and yield are very important factors in this respect. The credit rating of the issuing agency, in the case of these it is the government, is important. An AAA positive rating means that an investor will get a lower interest rate for his investment (paid by the government out of our taxes and part, these days, of the deficit) than an AAA negative rating or an AA rating. Higher interest rate paid by the government means a higher deficit and the need for more spending cuts.
At present I consider (as do many investment experts) longer duration government bonds to be somewhat more risky than normal, regardless of rating, as there is a 'bond bubble' building and when interest rates rise this bubble is likely to burst driving down capital values. There is a market move to short-duration bonds and towards corporates and sub-investment grade in response. Some buyers though are more restricted in their options and this is a factor that is seriously damaging annuiity rates, driven by QE which is helping keep the interest rates artificially low.
Problems stacking up for the future in order to help ease the current problems!
That is the end of your lesson in government bonds and credit ratings.
Howard - #1915 - no AAA does not represent a 'wonderful economy' at all. It merely reflects the agencies view of the government's ability to service its debt. The economy is a much wider matter..... A country can be AAA positive rated but still in the depths of a deep and long recession if it had managed its affairs well during the preceding growth phase of the economy.
Guest 698- Registered: 28 May 2010
- Posts: 8,664
I've scoured the web looking for credible authors saying it would hurt us. I can't find any. It's only Mr Osborne, who would be embarrassed by it, who says it would be a Terrible Thing. Oh, and the Shadow Chancellor. But he's not credible.
I'm an optimist. But I'm an optimist who takes my raincoat - Harold Wilson
Keith Sansum1
- Location: london
- Registered: 25 Aug 2010
- Posts: 23,942
more and more people are finding he is credible
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Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
Balls!!!! credible!!! not among people who know a thing or two about the economy and what happened post-1997. He is the architect to Brown's mismanagement that contributed so much to this mess. Not according to polls either.
Keith Sansum1- Location: london
- Registered: 25 Aug 2010
- Posts: 23,942
Heres another view;
If the third quarter is as poor for Britain we will be put on negative watch,, A cut in top notch rating WOULD BE highly damaging,
Increasing the price of debt for Govt, and a potential for an even slower recovery
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Guest 698- Registered: 28 May 2010
- Posts: 8,664
Source, please?
I'm an optimist. But I'm an optimist who takes my raincoat - Harold Wilson
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
Keith. I am puzzled by #1926. We are in Q1 - so tell me your Q3 - is that the next Q3, starting June next year (very odd if so) or the last Q3, that started June last year???? Or perhaps you copied/pasted something that is over 6 months out of date.
So please qualify that 'other view', source and date please or perhaps better still a link.
Incidentally - we are already on negative watch and have been for a while.
Keith Sansum1- Location: london
- Registered: 25 Aug 2010
- Posts: 23,942
Happy to advise it is an expert but please don't let an expert get in the way of discussion.
It was Stephen Lewis chief economist for monumental securities
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Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
Link please - what about the points I raised?
Keith Sansum1- Location: london
- Registered: 25 Aug 2010
- Posts: 23,942
Link?
careful; im just quoting him
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Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
Not good enough Keith. When did he say that, as I said it could have been 6 months or more ago? That could significantly change any significance. It makes no sense as a 'current' quote. I watch the markets all the time, specially at this time of year when I am reviewing my investment strategy when I am considering the views of a whole range of economists and investment experts.
Your reluctance to provide a link or supply the information I asked for.
Incidentally - I explained my self above the significance of any credit rating. If you are worried about the negative outlook for our AAA rating then just consider how much worse it would be if Labour had got elected with their (slightly) lower pace of deficit reduction!! We would certainly have lost that rating before now and would be even deeper in the mire with the build up of debt as a result of a significantly higher deficit than we have now.
Be careful what you wish for.
Keith Sansum1- Location: london
- Registered: 25 Aug 2010
- Posts: 23,942
Barryw
I was just quoting another chief geezer and if you give me time i will find where i read it
computers and me dont go together(as paul b will confirm lol)
soon as i find it i will put on here
busy at home at the moment just glancing in time to time
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Guest 698- Registered: 28 May 2010
- Posts: 8,664
http://www.telegraph.co.uk/finance/economics/8660752/Weak-UK-growth-puts-AAA-rating-at-risk-experts-warn.html
Found it. It's eighteen months old so it predates the cut in the USA's rating. And Keith must have been cagey about posting the link cos it was in the Torygraph!
Barry if you posted that the sun rises once a day Keith would find an expert with a different opinion.
I'm an optimist. But I'm an optimist who takes my raincoat - Harold Wilson
Keith Sansum1- Location: london
- Registered: 25 Aug 2010
- Posts: 23,942
Yes peter just found it again myself,
was just about to post it.
Whilst the torygraph may not be my chosen paper(I don't buy any papers by the way)
it was another view
it may be out of date, but the detail remains
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Guest 698- Registered: 28 May 2010
- Posts: 8,664
An interesting article from the Grauniad a year ago:
Ed Balls, the shadow chancellor, has moved to challenge accusations that Labour is not credible on the economy by telling the public sector unions that he endorses George Osborne's public sector pay freeze until the end of the parliament, and that he accepts every spending cut...
"My starting point is, I am afraid, we are going to have keep all these cuts. There is a big squeeze happening on budgets across the piece. The squeeze on defence spending, for instance, is £15bn by 2015. We are going to have to start from that being the baseline. At this stage, we can make no commitments to reverse any of that, on spending or on tax. So I am being absolutely clear about that."
I'm an optimist. But I'm an optimist who takes my raincoat - Harold Wilson
Keith Sansum1- Location: london
- Registered: 25 Aug 2010
- Posts: 23,942
If I recall correctly Labour did say it was going to make cuts if they were re elected not that i have any intention of defending them.
Taking the politics out of it all my earlier posting was of an financial expert who im sure still holds much the same view as not much changed and we have gone in the direction he predicted at the time
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Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
18 Months ago, so he was talking about Q3 2011.... even further back than I thought, before we went onto a negative rating and before a lot of QE. A lot has changed in that time.
Keith Sansum1- Location: london
- Registered: 25 Aug 2010
- Posts: 23,942
So then brian
the geezer i quoted who gave an alternative view and looks to have been correct
Any comments
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Guest 698- Registered: 28 May 2010
- Posts: 8,664
Keith, the price of government borrowing has fallen since your expert made the prediction that it would rise. How is that getting it right?
http://www.sharingpensions.co.uk/gilt-yields-chart-latest.htmI'm an optimist. But I'm an optimist who takes my raincoat - Harold Wilson
Keith Sansum1- Location: london
- Registered: 25 Aug 2010
- Posts: 23,942
So you saying peter the guy is wrong
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