Another tumultuous week in which the Bank of England starts to panic!
Samasthiti Advisor’s Weekly Market Tracker – For the week ended Sep 30,2022
• Another tumultuous week- you know things are strange when one of the oldest central banks 🏦 in the world – the Bank of England, starts panicking. And the credit for this scare😫 goes to none other than the tax cuts announced in the ‘mini-budget’ by the new Prime Minister of UK – Liz Truss.
• Yes, you read that right – tax cuts😱! Imagine that, when inflation in the UK is running high (at 8.6%) and government debt keeps scaling new peaks. The bond and currency markets were, let’s put it mildly, not happy🥶.
• U.K. government bond yields shot up sharply – registering one of their sharpest monthly increases since (probably) 1957. Yield on the 10-year UK govt bond pierced the 4.5% mark😤, prompting the Bank of England to intervene to cool the yields.
• Short term interest rates in the US continue to increase. The yields on 2-year and 5-year US government bonds are above 4% – now higher than the yield for the 10-year and 30-year US govt bonds😳. So, the yield curve has inverted – short term rates are higher than long term rates, which could be a signal for sluggish growth soon.
• Weakness in US equities continue. The S&P500 was down 2.9% and the NASDAQ100 was down 3.0% last week. Year to date (YTD), S&P500 is now 24% down and NASDAQ100 is down 32% 😳.
• Following the global trend, both the Nifty and the Sensex closed the last week lower by about 1.2%. Debt markets remained benign in India, even after the RBI increased interest rates by 50bps on Friday. India 10-year government bond yield continues to hover around the 7.4% mark.
• USD continues to be strong. It’s the only currency in town with its mojo on😎. Watch out for the INR breaching the 82 mark to the dollar soon!
• Until next time, goodbye 🍕and have a great weekend🎪!
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