Aurelia Butler

“Thanks to a strong recovery momentum and sufficient cash buffers, we don’t expect a full-year recession but rather a drop in GDP growth to 3.3% this year versus 4.4% previously,” S&P said in a report. It added that as close neighbours to Russia and Ukraine, European countries were among the most exposed to the crisis.”Uncertainty surrounding our forecasts is higher than usual, with downside risks to growth for 2022 and upside risks for inflation this year and next.” More

JPMorgan’s digital bank Chase has launched a new UK savings account with a 1.5 per cent rate, outpacing high street competitors offering better deals for customers following rate rises from the Bank of England. UK savers are under pressure as inflation hit a 30-year high of 6.2 per cent last month, with a further rise set for April when regulated energy prices are set to jump and as war in Ukraine raises concerns over the cost of fuel and other commodities.“With the cost of living increasing, we know that consumers want to maximise the interest they can earn with the reassurance of being able to access their savings instantly,” said Shaun Port, Chase’s UK managing director for savings and investments.Chase’s new easy access account, which is linked to a current account from the digital bank, will allow savers to deposit up to £250,000 in total which can be accessed at any time. Customers can open up to 10 separate saver accounts. “This is clearly a carrot from the digital bank to try and drive new current account openings and in the current market l expect it will be swamped with applications,” said Andrew Hagger, a personal finance writer at Moneycomms.co.uk.Other lenders are set to raise the rates on their savings accounts next month, though not to the same rate. The rate on Lloyds Bank’s and NatWest’s instant saver accounts will rise from 0.01 per cent to 0.1 per cent, although other products saw larger increases. While Chase does not have a minimum income requirement for a current account it requires smartphone access and does not currently offer joint accounts, said Hagger, potentially limiting some customers. “Let’s just hope that the rate is more than a short term incentive that then gets cut just a few months down the line,” he said.JPMorgan launched Chase in the UK retail market last year, its first overseas retail bank in the company’s 222-year history, in a move compared to Goldman Sachs’ decision to launch consumer bank Marcus in 2018. At launch, Chase initially offered only current accounts with a rewards programme.The UK retail market has been an attractive test bed for US banks seeking to expand digital offerings, with its strong fintech scene and well-established payments infrastructure. Open Banking standards, which are meant to give customers more control over their data, in theory allow them to switch banks more easily.This month, the FT reported that the decision to launch Chase in competition with digital players such as Revolut, Monzo, Starling and an array of high-street brands has drawn questions, at a time when rivals such as Citigroup are shrinking their international operations. Big banks’ efforts to launch digital brands have had mixed success. JPMorgan’s first effort, US bank Finn, closed after a year. NatWest’s homegrown digital bank Bówas shuttered in 2020, lasting less than six months.Soaring inflation is now expected to hit 8 per cent by the end of June, fuelling fears of the impact on the cost of living. Earlier this month, the Bank of England raised its main interest rate from 0.5 per cent to 0.75 per cent. More

NatWest is to buy back about 5 per cent of its shares from the UK government for £1.2bn, reducing the Treasury’s voting rights in the lender to less than 50 per cent for the first time since 2008.The off-market purchase of almost 550mn shares, equivalent to 4.9 per cent of the stock in issue, means the Treasury will be left with a 48 per cent stake in NatWest. The UK lender will buy the shares at Friday’s closing price in London of 220.5p. The transaction is expected to be settled on Wednesday.Shares in the bank rose 1.7 per cent in morning trading on Monday. They have risen more than 18 per cent over the past year.The British government has owned the majority of NatWest, which used to be called Royal Bank of Scotland, since it was rescued at the height of the financial crisis with a £46bn bailout.It has repeatedly pushed back its deadline to offload the rest of its stake as political and economic uncertainty hit the bank’s share price. In 2021, the government announced it had appointed Morgan Stanley to manage the sale of its stake in NatWest.“What’s happened today is largely as expected, although the confirmation it’s happened is welcome,” said Ian Gordon, banking equity analyst at Investec, adding that it left the government on course to exit the bank in full by around the end of 2025.There was some debate within the market that the share buyback might have been delayed until the end of April, he said, following first-quarter results.RBS and the government have said in the past that it was inevitable the Treasury would suffer a loss as it reduced its stake because NatWest is a significantly smaller bank than it was before the financial crisis, and the purchase in 2008 was a rescue deal rather than an investment.When asked in February about what impact the end of government ownership would have on the bank, chief executive Alison Rose said that “practically it will make no difference”.A booming mortgage market and more than £1bn of loan impairments being written back helped the bank to a net profit of £2.95bn last year, a sharp reversal from a £753mn loss in 2020. It also announced an on market share buyback plan of £750mn. However, its fourth-quarter results were hurt by its trading business NatWest Markets, which made an operating loss of £302mn.The lender’s reputation took a hit in December when it became the first institution to plead guilty in a criminal prosecution under anti-money laundering laws. It was fined £264.8mn.Under the terms of a memorandum of understanding announced in April 2018, the share purchase means NatWest will pay £427mn into its main pension scheme. More

ORLANDO, Fla. (Reuters) – Hedge funds bet correctly on the U.S. yield curve flattening after the Fed kicked off its interest rate-raising cycle earlier this month, the first week in five that they have positioned for a shrinking gap between the two- and 10-year yields.Federal Reserve Chair Jerome Powell said last week that he pays more attention to the shorter end of the curve for potential signals about the health of the economy. But many market participants focus flattening of the interest rate curve between two- and 10-year yields, which has preceded all six recessions in the past 45 years. Some of Wall Street’s biggest banks are now predicting inversion later this year, but none are forecasting recession. Not yet, anyway.Futures market data for the week through March 22 showed that funds reduced their net short position in 10-year Treasuries and more than doubled the size of their net short position in the two-year space.The latest Commodity Futures Trading Commission report showed that funds increased their net short two-year Treasuries position by 27,015 contracts to 47,448, and cut their 10-year net short position by 57,163 contracts to 263,834.A short position is essentially a bet that an asset’s price will fall, and a long position is a bet it will rise. In bonds, yields rise when prices fall, and move lower when prices rise.A deeper dive into the data shows some potentially significant moves under way in the medium- to longer-term parts of the curve. Funds have cut their net short position in five-year Treasury futures by more than a third in the last three weeks. In the 10-year space, they have reduced their net short position by almost a third in just two weeks.This suggests a growing belief that longer-dated yields will soon peak, then fall. Funds’ long 10-year bets rose by around 119,000 contracts in the week, the biggest rise in five years and fifth-largest since the contract was launched 35 years ago. Graphic: CFTC 10-Year Treasuries – Long Positions – https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwqnkrvo/CFTC10sLONG.pngGraphic: 2s/10s Yield Curve – https://fingfx.thomsonreuters.com/gfx/mkt/egvbkbamnpq/CFTC2s10s.png INVERSION – WHEN, NOT IF?The curve between two- and 10-year yields flattened dramatically after the Fed’s lift-off on March 16. It fell to just 14 basis points on March 22, crushed by a wave of tough, inflation-busting rhetoric from Fed officials that pushed the two-year yield sharply higher.Several Wall Street big banks now expect 2s/10s inversion – from “modest” at Goldman to “large” at Bank of America (NYSE:BAC). Economists at BofA now expect a whopping 50 basis point inversion by the end of this year – a two-year yield of 3.00% and a 10-year yield of 2.50%. Graphic: Eurodollar 2023 ‘Terminal’ Rate – https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrqeadvm/ED24.png Many of them are now penciling in multiple rate increases of 50 basis points. Citi is gunning for four consecutive 50 bps hikes this year and a peak Fed funds range of 3.50%-3.75% next year, well into restrictive territory.”The 2s-10s curve is nearing inversion, and we think it will invert in the coming weeks (or days),” Morgan Stanley (NYSE:MS) strategists wrote at the weekend. Their base case scenario is a 40 bps inversion by the end of the year. These forecast changes are driven more by a projected higher path for the two-year yield than a lower path for the 10-year yield, as the Fed prepares to take the Fed funds rate beyond the neutral level estimated to be around 2.50%.The so-called terminal rate implied by Eurodollar futures, the anticipated peak in interest rates before they start to come down again, is now above 3%, and will be reached around June-September 2023.With more Fed policymakers coming out in favor of faster and more aggressive tightening if needed, CFTC data shows that funds expanded their net short three-month Eurodollar futures position to 2.657 million contracts, the largest since October 2018. The lower the price of these contracts goes, the higher the implied rate. Graphic: CFTC Eurodollar Futures – https://fingfx.thomsonreuters.com/gfx/mkt/klvykjdzkvg/CFTCED.jpg (The opinions expressed here are those of the author, a columnist for Reuters.) (By Jamie McGeever; Editing by Cynthia Osterman) More