Gilt/MMF repercussions

Ciprico

It seems a fair bit of money is flowing into gilts and MMF that previously went "somewhere else"...

Presumably that "somewhere else" is suffering...

Is there a pitfall somewhere caused by this...

When the stockmarket shows signs of recovery the flow will presumably reverse. Could that cause unexpected problems...

GeoffTF

The banks are making record profits despite that. The global equity market is near an all term high. There is not much scope for "recovery". The market will almost certainly go to a new all time high eventually, but that does not have a lot to do with gilts or MMF.

InvesterJones

That is the hope - such reduction in capital will lead to reduced spending and thus bring inflation down.

On recovery.. well look at the S&P 500 already.. But yes, fully expected that there will be flow the other way as well - this is what central bankers have to keep a check on - if it looks like inflation is increasing again they'll need to increase interest rates again.

EthicsGradient

Ciprico said:

It seems a fair bit of money is flowing into gilts and MMF that previously went "somewhere else"...

Presumably that "somewhere else" is suffering...

Is there a pitfall somewhere caused by this...

When the stockmarket shows signs of recovery the flow will presumably reverse. Could that cause unexpected problems..

What are the figures for the flows? The gilts market is pretty huge, with institutional and international investors dominating it. When you say "MMF", do you mean UK-oriented ones, or international? Do you mean the UK stockmarket (ie the LSE - FTSE 100 etc.), or world markets (the S&P 500 has recovered to the level at the start of the invasion of Ukraine, and higher than all points more than 2 years old; the EuroStoxx 50 reached its high since the 2007/8 crash on 31st July this year; the wider Stoxx Europe 600 is higher than anything before June 2021, and also back to around the level it was at the start of the invasion of Ukraine).

Aminatidi

I thought the whole thing with MMF funds was there may be liquidity concerns in a "bank run" type scenario?

Whilst I thought the retail portion of gilt markets was actually very small and regardless of any turbulence going on you do know that on a given date you'll get your principal back - unless the UK goes bust.

InvesterJones

Aminatidi said:

I thought the whole thing with MMF funds was there may be liquidity concerns in a "bank run" type scenario?

Whilst I thought the retail portion of gilt markets was actually very small and regardless of any turbulence going on you do know that on a given date you'll get your principal back - unless the UK goes bust.

Depends on how liquid the underlying assets are - I don't think there's any issue with UK MMFs