UK at Risk of Ratings Upgrade

System

When we got downgraded commentators rushed to explain that it didn't matter, and merely showed that the rating agencies had got it wrong.
So conversely, it's nothing to get exited about now?

Generali

Clifford_Pope wrote: »

When we got downgraded commentators rushed to explain that it didn't matter, and merely showed that the rating agencies had got it wrong.
So conversely, it's nothing to get exited about now?

It probably doesn't matter hugely in the grand scheme. It's pretty handy if you're in a Government that was being roundly criticized for policies which now are starting to look pretty well judged.

Road_Hog

Generali wrote: »

http://www.telegraph.co.uk/finance/economics/10489768/Derivative-markets-have-already-upgraded-Britain-to-AAA.html

CDSs (a kind of 'insurance' against bond default) on UK Gilts are already being priced as if AAA. Expect the ratings agencies to follow suit.

C'mon Genny, tell us how much you had shorted.

macaque_2

Generali wrote: »

It's pretty handy if you're in a Government that was being roundly criticized for policies which now are starting to look pretty well judged.

Fair enough but has the fat lady sung yet?

It confounds me that the UK can borrow at such favourable rates given all the debt, borrowing, public spending, QE etc.

We have seen lightning strike out of a clear blue sky before which has turned to full blown panic within hours (e.g. starting with problems in a small bank). Ironically, this time the sky is black with clouds but no lightning.

Doubtless one of the city experts will explain to me why things are OK (and doubtless I will take this with a pinch of salt).

antrobus

macaque wrote: »

...It confounds me that the UK can borrow at such favourable rates given all the debt, borrowing, public spending, QE etc....

Favourable compared to what exactly?

Paying 2.84% on a 10 year gilt is quite a lot compared to 0.90%. Which is what Switzerland is paying. It's also more than the 1.82% we were paying this time last year.

michaels

But isn't that partly about expectations for relative rates of inflation/currency movements not just an indication of relative confidence in the respective economies?

macaque_2

antrobus wrote: »

Favourable compared to what exactly?

Paying 2.84% on a 10 year gilt is quite a lot compared to 0.90%. Which is what Switzerland is paying. It's also more than the 1.82% we were paying this time last year.

I feared that one of the city boys might strike back with superior financial knowhow. But don't take this as an admission of defeat. Here is my (somewhat agricultural) answer to your point:

Imagine my neighbour comes to me for a loan of £100 and promises to pay me back £102 in 12 months time. I point out that he is spending a lot of money. He has starting building a rail track for his children in the back garden and has a gardener and a housekeeper. So I ask him who he works and how much is he paid. He tells me that he works for his wife who pays him £100k a year. So I then ask him who his wife works for and how much is she paid. He says she works for him and he pays her £100k. I then ask him where he will get the money to pay me back. He then assures me that he has a QE machine in his basement which prints money.


My reaction to all this would be to tell my neighbour to try Wonga and then hurriedly convert all my money into a currency that is different to the one my neighbour is using.

grizzly1911

Generali wrote: »

It probably doesn't matter hugely in the grand scheme. It's pretty handy if you're in a Government that was being roundly criticized for policies which now are starting to look pretty well judged.

Or it could be very little to do with what the governments have done apart from buy expensive breathing space.

antrobus

macaque wrote: »

I feared that one of the city boys might strike back with superior financial knowhow....

Me, a 'city boy'?!? I simply work on the principle that God Gave Us Google For A Reason.

macaque wrote: »

...But don't take this as an admission of defeat. Here is my (somewhat agricultural) answer to your point:

Imagine my neighbour comes to me for a loan of £100 and promises to pay me back £102 in 12 months time. I point out that he is spending a lot of money. He has starting building a rail track for his children in the back garden and has a gardener and a housekeeper. So I ask him who he works and how much is he paid. He tells me that he works for his wife who pays him £100k a year. So I then ask him who his wife works for and how much is she paid. He says she works for him and he pays her £100k. I then ask him where he will get the money to pay me back. He then assures me that he has a QE machine in his basement which prints money. ....

I'm rather inclined to point out that someone with any kind of machine in his basement that can print money would have no need of a loan.

Generali

antrobus wrote: »

Favourable compared to what exactly?

Paying 2.84% on a 10 year gilt is quite a lot compared to 0.90%. Which is what Switzerland is paying. It's also more than the 1.82% we were paying this time last year.

Look at the inflation records of Switzerland and the UK over the last 50 years and then tell me which you'd rather lend to at a fixed interest rate.