Good morning!

Graham here with the placeholder for today's SCVR.

I'm planning to make a few macro observations before commenting on the latest company news.

Contrary to popular belief, I didn't quit finance to go into gardening - I'll have to use my Twitter more carefully in future.



Small-caps of interest today (final list):

Finished at 13.20pm.

Macro Latest - Strange Events

There have been some very unusual events in recent days, related to the pandemic, which I think are worth a mention.

1. UK Sells a Negative Bond

The Debt Management Office yesterday sold a bond with a negative interest rate for the first time.

It was about £4 billion in value and matures in 2024.


The yield was only very fractionally negative - minus 0.003%.

So does it really matter? I think so, even if it's a mostly symbolic event.

It shows that the zero bound can be broken in the UK.

We've already seen negative yields in many other countries in recent years. Now that the zero bound has been breached for the first time in the UK, the institutions buying these bonds might start to think of it as normal, and will reset their expectations for where yields might go in future.

Why did it happen?

The effect of quantitative easing is of course very important - the Bank of England owns c. 25% of UK government debt.

The emergency low 0.1% base rate is also a big factor, because it depresses interest rates generally. It's not as if High Street banks offer great alternatives for yield.

To the extent that the negative bond yield is not purely driven by existing policy, it's also a reflection of pessimism for the years ahead - it reflects extreme risk aversion, and perhaps a belief that UK interest rates are about to turn negative.

On that point...

2. BoE won't rule out negative base rate

New governor of the Bank of England, Andrew Bailey, has refused to rule out imposing a negative base rate in the UK.

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