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UK exclusive gold market resilient despite ‘major repricing’

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© Reuters. FILE PHOTO: A general view of the Bank of England building in London, Britain, August 4, 2022. REUTERS/Maja Smiejkowska/File Photo

Written by David Milliken

LONDON (Reuters) – Britain’s bond market is undergoing “significant re-pricing”, but it should comfortably absorb the 62 billion pounds ($69 billion) of debt announced after Finance Minister Kwasi Koarting’s mini-budget on September 23, the kingdom’s debt chief United. The Management Office (DMO) said Monday.

Robert Steman – the man charged with overseeing the £2.1 trillion UK government bond market – saw a parallel between the high volatility over the past 10 days and that in March 2020 early in the COVID-19 pandemic, when the Bank of England also intervened to calm markets.

Steemann told Reuters in an interview that the overall situation in recent days has been different, with bond traders in general more able to continue trading, “albeit in very difficult circumstances,” compared to early 2020.

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UK 10-year government bonds posted their biggest fall in a calendar month since at least 1957 in September, as concerns over Kwarteng’s £45 billion unfunded tax cut raised fears of a sharp rate hike by the Bank of England ( BoE) and other major central banks.

Ten-year yields rose to their highest level since 2008 on September 28 at 4.582%, 70 basis points higher than before Kwarteng’s mini-budget. It was just under 4% on Monday.

“Bonds and other sovereign bond markets will have to undergo some major repricing,” Stemann said.

He added, “There are a lot of uncertainties…not just the financial picture, but the potential response to monetary policy. This is why…a very large portion of the market’s volatility is.”

The Destination Management Authority increased its financing target for 2022/23 by EGP 72 billion to EGP 234 billion following Quarting’s mini-budget, EGP 62 billion of which will be funded from government bonds.

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“I am sure it can be digested reasonably smoothly,” Stemann said.

British government bond prices rose on Monday after Kwarteng announced a shift in one of his key measures, saying he would no longer get rid of the highest tax rate paid by the top 1% of earners.

But Stheeman said the market has been more focused on the government’s broad fiscal position and, more importantly, how this will affect the pace at which the Bank of England will raise interest rates.

BoE chief economist Howe Bell warned last week that the bank would likely need to make a significant rate adjustment on November 3, when a policy decision is due. The next day, the Bank of England stepped in to buy billions of pounds from 20 and 30 years ago to stem the market’s slide.

Steemann – whose wife sits on the BoE committee on the decision – said the central bank’s announcement of the purchase came as a “big surprise”, amid the DMO’s sale of £4.5bn of government debt.

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While the timing of the announcement may have made life more difficult for bond traders, Steiman said its unexpected nature highlighted the independence of the Bank of England.

Slope edge for Gilts?

The Bank of England said it will stop buying bonds on October 14 – long enough, it thinks, for pension funds hit by low bond prices to put their homes in order – and plan to resume its deferred gold sales program on October 31.

Asked if he was concerned about these potential higher edges, Steemann said, “I’m not overly concerned. I think it’s in the nature of the market we’re in, that there’s always the potential for uncertainty, and that clearly applies now.”

He added that failed auctions could not be ruled out, as the Tourist Destination Management Office could not collect the amount of money it sought on a particular day. The most recent was in 2009.

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Most of the increase in debt issuance during the remainder of the fiscal year will come from short-term and, to a lesser extent, medium-term bonds. This reflects more liquidity in that part of the market, Stemann said.

Stheeman said the wide spreads on gold bonds — which on Monday were about 10 basis points for two-year government bonds, according to Tradeweb data — will hopefully narrow as market volatility declines.

He added that regulators also need to look at how liability-driven investment (LDI) funds in the pension industry use derivatives.

(dollar = 0.8929 pounds)

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Disasters caused insured losses of $122 billion in 2022

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© Reuters. The remains of destroyed homes are seen nearly a month after Hurricane Ian made landfall in Fort Myers Beach, Florida, US, October 26, 2022. REUTERS/Marco Bello

ZURICH (Reuters) – Hurricane Ian and other natural disasters have caused insured losses of $115 billion so far this year, well above the 10-year average of $81 billion, Swiss Re (OTC:) estimated Thursday.

She explained that natural and man-made disasters caused economic damage amounting to $268 billion, of which $122 billion was covered by insurance, making 2022 one of the most expensive sectors so far.

Hurricane Ian, a Category 4 hurricane that struck Florida in September, was the single largest loss-causing event of the year so far, with estimated insured losses of about $50-65 billion. This would put it second only to Hurricane Katrina in 2005.

Swiss Re said 2022 marked the second year in a row that estimated insured losses exceeded $100 billion, in line with an average annual increase of 5-7% over the past decade.

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It added that secondary risks such as floods and hailstorms caused insured losses of more than $50 billion.

Widespread flooding in Australia after heavy rains in February and March caused an estimated $4 billion in damage in the country’s costliest natural disaster.

France suffered the deadliest series of hailstorms ever observed, with insured losses reaching an estimated 5 billion euros ($5.2 billion).

Swiss Re has estimated that more than 11,000 people have died in natural and man-made disasters so far this year, excluding the death toll from extreme heatwaves in Europe.

Munich Re is due to release its annual report on the disaster in January.

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($1 = 0.9626 euros)

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Biotech tells Citadel Securities that other major traders manipulated its share price

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In a new lawsuit, Northwest Biotherapeutics has accused the market maker of illegal “spoofing” orders.

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Dollar general stocks plunge as expectations drop

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The stock fell sharply Thursday after the discount retailer reported a rare fiasco, and its fourth-quarter financial outlook fell short of Wall Street estimates.

The company said fourth-quarter earnings will range between $3.15 and $3.30 per share. Analysts tracked by FactSet had expected earnings of $3.66 per share in the fourth quarter. Forecasts call for growth of 7% to 8% for the fiscal year versus previous forecasts for growth of 12% to 14%.

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