UK Gilts Reverse Gains As Investors Eye Fiscal Fragility And Global Rate Risks

Economic

Summary:

UK bonds retreated on Thursday, erasing the gains made after Wednesday’s announcement of a smaller-than-expected debt plan. Investors quickly shifted their focus to the nation’s precarious fi

UK bonds retreated on Thursday, erasing the gains made after Wednesday’s announcement of a smaller-than-expected debt plan.

Investors quickly shifted their focus to the nation’s precarious fiscal position and the broader risks of rising global borrowing costs.

UK gilts under pressure as rising yields threaten Reeves’ fiscal buffer

Gilts declined across the curve, underperforming their European counterparts and pushing the benchmark 10-year yield up by as much as eight basis points to 4.81%—its highest level since mid-January when a global bond selloff severely impacted Chancellor Rachel Reeves’s fiscal flexibility.

Although Reeves yesterday restored her fiscal buffer to exactly where it was in October, firms including BlackRock Inc., Allspring Global Investments and Fidelity International say the UK bond market remains very much at the mercy of external forces.

Lauren van Biljon, senior portfolio manager at Allspring Global Investments, noted: “Reeves has very limited headroom, and potential domestic and international shocks are numerous.”

The concern is that rising global bond yields, persistent inflation, and weaker-than-expected growth could trigger another selloff in UK bonds, once again eroding Reeves’ fiscal buffer.

The Office for Budget Responsibility cautioned that this headroom could vanish entirely if U.S. President Donald Trump imposes 20% tariffs on global trade or if borrowing costs increase by just 0.6%.

UK fiscal woes cast a shadow over gilts ahead of autumn budget

Vikram Aggarwal, fixed-income investment manager at Jupiter Asset Management, said the deterioration in UK public finances can’t be underestimated. He noted that the cheapness of gilts doesn’t make them an attractive buy.

The fragile state of the UK’s finances is heightening expectations that the government may need to raise taxes or implement further spending cuts in October’s Autumn Budget. The Office for Budget Responsibility estimates a 46% chance that Reeves will breach her fiscal rule requiring taxes to cover day-to-day spending.

Shamil Gohil, fixed-income portfolio manager at Fidelity International, said that Gilts will probably remain in no man’s land until the Autumn budget. He added that they will likely see some fiscal slippage and buffer erosion.

UK bonds rally on borrowing plan, but fiscal risks loom large

Market movements have been erratic, with gilts experiencing sharp fluctuations driven by shifting investor sentiment.

On Wednesday, UK bonds posted one of their strongest performances of the year following the Debt Management Office’s announcement of a smaller-than-expected borrowing plan. Yields on 30-year notes dropped by as much as nine basis points—their biggest decline since early February.

Pooja Kumra, senior UK and European rates strategist at Toronto Dominion Bank, attributed Wednesday’s bond rally primarily to the favourable issuance figures. However, she emphasized that the underlying reality remains unchanged, with the UK still trapped in a difficult fiscal position.

Some funds, including Vanguard, took confidence from the government’s firm re-commitment to its fiscal rules, saying the relative cheapness of gilts outweighed the risks around the UK’s economic trajectory.

Ales Koutny, head of international rates at Vanguard, reinstated his long-dated gilts position against Germany. He noted that Reeves’ firm stance on fiscal rules being non-negotiable has helped ease concerns about shrinking fiscal headroom. He expects UK bonds to realign with U.S. yields in the coming months.

Markets have wavered for months in their approach to UK gilts, shifting between buying for their high yields and selling over fears that the Labour government may struggle to manage the nation’s deficit.

Vivek Paul, UK chief investment strategist at BlackRock, noted that the country’s borrowing costs remain highly vulnerable to spikes, suggesting gilts could face renewed pressure.

Source: CryptoSlate

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Thomas

Cryptocurrency

Recent developments in the Bitcoin market reveal a significant increase in confidence, primarily driven by large-scale purchases from major investors, commonly referred to as whales. Although macroeconomic uncertainties and fluctuating technical indicators have cast a shadow over Bitcoin’s recent gains, the robust interest from institutional players could reshape market dynamics.

Whales Make Historic Purchases: $11.2 Billion Spent

Since March 11, whales have amassed over 129,000 Bitcoin, a move valued at about $11.2 billion, while prices averaged around $87,500. This surge in buying activity marks the highest accumulation since August 2024 and underscores the long-term confidence among major players in the cryptocurrency sector despite short-term instabilities.

According to on-chain analysis from Glassnode, this trend suggests a rising confidence among key market players. The significant buying by whales not only stabilizes prices but also plays a critical role in shaping market sentiment, effectively counterbalancing the selling pressures from smaller investors.

What Role Do Technical Indicators Play?

Bitcoin’s recent recovery, following a dip below $78,000, can be attributed to optimistic signals from the Federal Reserve and the anticipation of upcoming tightening tariff policies. These factors help to bolster short-term investor confidence as the market seeks to stabilize.

Glassnode reports indicate that wallets holding more than 10,000 BTC are mitigating the effects of smaller investors’ sell-offs, suggesting that long-term holding strategies remain intact. The rise in Bitcoin classified as “1Y+ HOLD,” which indicates coins that have not been moved for over a year, reflects a growing resilience among holders against transient price fluctuations.

The Crypto Daybook Americas suggests that this trend indicates a prevailing commitment to long-term strategies among significant market players. Even as the market remains susceptible to volatility, the sustained interest from whales signifies that long-term goals are being actively pursued.

Large investors made significant Bitcoin purchases totaling $11.2 billion. Accumulation levels are reminiscent of past bullish trends, indicating confidence.Despite market volatility, long-term holding strategies among major players remain strong. Optimism from the Federal Reserve and upcoming policy changes contribute to market recovery.

The ongoing activity among whales in the Bitcoin market highlights their crucial role in shaping market stability, as their confidence may pave the way for a more secure trading environment. Their strategic purchases not only affirm their belief in Bitcoin’s future potential but also help establish a counterbalance against prevailing selling pressures. This behavior could prove pivotal as the market navigates through its current challenges.

Source: CryptoSlate

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Warren Takunda

Economic

Rachel Reeves has said that the UK is not planning retaliatory tariffs on the US, at least for now, after Donald Trump announced a 25% tariff on all car imports, sending shares in carmakers sharply lower.

“We are not at the moment in a position where we want to do anything to escalate these trade wars,” the UK chancellor told Sky News when asked if Britain would impose retaliatory tariffs against the US. “Trade wars are no good for anyone.”

She said an escalation of tariffs would be bad for Britain “but it would be bad for the US as well, and that’s why we are working intensely these next few days to try to secure a good deal for Britain”, Reeves said in an interview with the BBC. “We don’t want to get into a trade war.”

Trump said in the Oval Office that the tariffs “start off with a 2.5% base, which is what we’re at, and go to 25%”.

The new levies on cars and light trucks will take effect on 3 April, a day after Trump plans to announce reciprocal tariffs aimed at the countries responsible for the bulk of the US trade deficit.

Shares in US carmakers fell in after-hours trading after Trump’s announcement, with General Motors down by 6.2%, while Ford lost 4.7%.

Aston Martin was the top faller on the FTSE 100 index in London on Thursday morning, with the shares falling 6% to hit a record low of 67p. The FTSE 100 fell more than 50 points in early trading.

Carmakers dragged European shares to a two-week low. Volkswagen lost 3.6% – the company is the most exposed to tariffs among German carmakers because of its large supply base in Mexico and lack of US production for its Audi and Porsche brands.

The Dax, the benchmark index for Germany, which is among the biggest suppliers of cars and car parts to the US, fell by 1.6%.The Chrysler parent, Stellantis, slumped by 6.4%, Mercedes-Benz lost 5.5%, BMW fell by 3.9% and Porsche slid by 4.2%, while Volvo Cars and the car parts maker Continental declined by about 2.5% each.

It was a similar picture in Asia. In Japan, shares in Toyota Motor lost 2%, Honda Motor fell by 2.5%, while Nissan Motor was down by 1.7%, which helped to pull the Nikkei index down 0.6%. In South Korea, Hyundai Motor’s shares fell by 4.3%, only days after it tried to placate Trump by announcing a $21bn investment in the US.

The UK’s Society of Motor Manufacturers and Traders called for more government support after reporting another fall in output. Mike Hawes, its chief executive, said: “These are worrying times for UK vehicle makers with car production falling for 12 months in a row, rising trade tensions and weak demand.”

He urged the UK and US governments to “come together immediately and strike a deal that works for all”.

Eurozone bond yields fell, as traders’ interest rate expectations shifted. Germany’s two-year bond yield, which is sensitive to European Central Bank rate expectations, fell five basis points in early trading to 2.07%, its lowest since 4 March.

Germany’s 10-year bond yield, the benchmark for the eurozone, fell by four basis points to 2.755%, while the Italian equivalent slid by three bps to 3.869%.

Traders in money markets added to their bets on ECB rate cuts and priced in a rate of 1.94% by the end of the year, down from 1.98% on Wednesday. Interest rates are currently at 2.5%.

Daniel Bergvall, the head of economic forecasting at SEB, said: “The escalation risks further dampening growth in several countries through cost increases and generally increased uncertainty.”

Trump’s announcement drew swift condemnation from the EU and from the Canadian prime minister, Mark Carney, who called it a “direct attack” on Canadian workers. The European Commission president, Ursula von der Leyen, described the move as “bad for businesses, worse for consumers”.

The new tariffs could increase the cost of a US vehicle by thousands of dollars, given the intertwined manufacturing operations across Canada, Mexico and the US.

Germany’s economy minister and the main industry body slammed the tariffs, warning that they would harm the European and US economies, and called for urgent negotiations to ward off a spiralling trade war.

Germany’s economy minister Robert Habeck called for the EU to give a firm response to Trump, saying: “It needs to be clear that we will not take this lying down.”

Source: Theguardian

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Warren Takunda

Cryptocurrency

BItcoin retains a $138,000 price target for 2025 as the market recovers from US trade tariffs, new analysis concludes.

Data covering bets on prediction service Polymarket suggests that BTC/USD could still gain around 60% from current levels this year.

“Conservative” Polymarket users cap BTC price upside at 60%

Bitcoin bull market projections have taken a beating this quarter thanks to multiple setbacks impacting crypto and the wider risk-asset spectrum.

Now, an assessment of all potential BTC price outcomes on Polymarket concludes that the bull market cycle may be capped at around 60% before 2026.

The results were uploaded to X by user Ashwin on March 27 and show that price bets extend all the way down to $59,000.

“The great thing about this analysis is that it not only provides a market sentiment score, like the Fear and Greed Index, but also attaches to it the expected price target for both bearish and bullish scenarios,” he explained.

“This offers a reference to compare one's price prediction with the market's.” Bitcoin Price Prediction: Markets Bet BTC Won't Go Higher Than $138K in 2025_1

Bitcoin Price Prediction: Markets Bet BTC Won't Go Higher Than $138K in 2025_1

BTC price targets on Polymarket. Source: Ashwin/X

Ashwin deconstructed the methodology used to analyze odds across multiple Polymarket arenas, resulting in a potential BTC price range between $59,040 and $138,617.

“The $138k Bitcoin price target may not seem bullish to most Bitcoiners, who are accustomed to hearing hyperbolic valuations. However, the market remains conservative as it recovers from the Trump tariff uncertainty,” he continued.

The modest expectations for BTC/USD mimic those elsewhere. On fellow prediction site Kalshi, one average BTC price target stands at $122,000 — just $11,500 beyond current all-time highs. Bitcoin Price Prediction: Markets Bet BTC Won't Go Higher Than $138K in 2025_2

Bitcoin Price Prediction: Markets Bet BTC Won't Go Higher Than $138K in 2025_2

BTC price odds (screenshot). Source: Kalshi

Bitcoin support failure remains a risk

As Cointelegraph continues to report, market participants have drawn lines in the sand that price action should not violate in order to protect the broader bull market.

These include the area around old all-time highs at $73,800 and the 2021 peak at $69,000.

Earlier this month, a historically accurate forecasting tool, which its creator describes as showing where Bitcoin “won’t be” in the future, gave a 95% chance of $69,000 holding.

In his latest update, popular trader Aksel Kibar stressed that the yearly average of $76,000 must stay in place.

“Extremely important for the price not to breach the year-long average,” he told X followers on March 26. Bitcoin Price Prediction: Markets Bet BTC Won't Go Higher Than $138K in 2025_3

Bitcoin Price Prediction: Markets Bet BTC Won't Go Higher Than $138K in 2025_3

BTC/USD chart. Source: Aksel Kibar/X

Source: Cointelegraph

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Christopher Hayes

Economic

Stocks

An anticipated slowdown in the world economy in 2025 sparked by uncertainty around the impact of U.S. President Donald Trump’s tariff plans has taken away from the appeal of riskier assets like stocks, according to analysts at Barclays.

In a note to clients on Thursday, the brokerage said it now expects global growth to come in at just 2.9% this year, down from 3.3% in 2024.

"Global supply chains are about be upended, which means prices will rise, final demand will drop, and growth will slow," the analysts said.

A murky outlook around Trump’s proposals for sweeping tariffs on both friends and adversaries alike are seen denting the ability of businesses to plan for the future, the analysts said, adding that consumers are also likely to ratchet down spending to shield their finances from potential levy-induced headwinds.

Since returning to the White House in January, Trump has raised tariffs on China to up to 30% and placed a 25% duty on steel and aluminum. He has also threatened to roll out tariffs on a range of sectors and institute measures to match foreign tariffs on U.S. goods.

On Wednesday afternoon, Trump said he would place 25% tariffs on automotive imports into the U.S., making good on a pledge to penalize foreign manufacturers of cars and trucks. The action, along with what the White House has dubbed "reciprocal" tariffs, are set to take effect on April 3.

Trump has argued that the tariffs are necessary to offset lost revenues from proposed tax breaks and help bring industrial jobs back to the U.S.

"We do not expect all the tariff threats to come to fruition; the economic damage would be severe, including for the US, and there seem to be off-ramps in some cases," the Barclays analysts argued.

They said that although worldwide economic growth is projected to slow and is broadly "uninspiring," they do not expect it to slide into recession.

Against this backdrop, the strategists noted that that are "uneasy" about risk assets "for the first time in several quarters," adding that they now recommend core fixed income over equities.

"Just months into the new year, the world economy is staring down the barrel of the tariff gun –- and the results are unlikely to be pretty," the analysts wrote.

Source: Investing

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Edward Lawson

Economic

Forex

(Bloomberg) -- US President Donald Trump’s trade war risks turning powerful influences that helped ease inflation over decades in the opposite direction.

“Some of the forces that helped the disinflation in the 1990s and the 1980s and the 2000s will be going into reverse,” Donald Kohn, a former vice chairman of the Federal Reserve, said on Thursday.

The dollar and European stocks fell after Trump announced 25% tariffs on auto imports and pledged harsher punishment for the EU and Canada if they join forces against the US. Investors worry that higher prices as a result of the tariffs may limit Fed interest-rate cuts.

US inflation slowed dramatically from the early 1980s, thanks in large part to aggressive Fed action under then-Chair Paul Volcker. Economists have also cited increasing globalization as a factor in stabilizing prices in the years that followed.

“We see already adverse supply shocks, and the threats of adverse supply shocks, from the tariffs threatened by the Trump administration,” Kohn told a conference in Cape Town. “The tailwinds that helped with the disinflation earlier are turning potentially into headwinds and that’s going to present some difficult decisions for the Fed.”

Kohn, a 40-year veteran of the Fed who left in 2010 and is now a senior fellow at the Brookings Institution in Washington, was speaking at an event hosted by the South African central bank to discuss inflation targets.

The widespread adoption of a numeric-inflation goal is also credited with contributing to lasting low inflation – outside of the post-pandemic period, when forecast errors led to a significant overshoot – alongside central-bank independence to get the job done.

Kohn warned that the Fed faced fresh challenges amid high budget deficits and public calls from the president to cut rates.

“Donald Trump has said he’s not going to fire Jay Powell, but he’s already advocated for lower rates,” Kohn said, referring to the current Fed chair who Trump privately discussed replacing during his first term in office. “Political pressure on the Federal Reserve is not going to be reduced at all.”

Source: Yahoo Finance

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Warren Takunda

Economic

The Pound recovered against the Euro and Dollar after U.S. President Donald Trump told reporters that next week he would impose a 25% import tariff on all vehicle imports.

The tariff would also apply to all vehicle components, leaving little scope for carve-outs. Trump said these tariffs were non-negotiable.

The developments come ahead of the April 02 "Liberation Day" tariff announcements, which are anticipated to be the most severe of the President's two terms in office.

The Pound traded weaker through the mid-week session, having been knocked by a softer-than-forecast set of inflation data. But it recovered late in the day when the tariff headlines from the White House rolled in.

The price action suggests it holds a status as a relative hedge against tariff news: the Pound-to-Euro exchange rate recovered from a low of 1.1924 to the cusp of 1.20 on Thursday.

The Pound-to-Dollar exchange rate has recovered from 1.2870 to 1.2905.

"The Sterling backdrop looks relatively well supported versus the EUR, not least when combined with the fact that the UK looks less exposed than the eurozone to tariff concerns," says Jeremy Stretch, Head of G10 FX Strategy at CIBC Capital Markets.

"Given that UK goods trade remains relatively balanced and or Trump appears to have a favourable view of the UK, relative to his antipathy as regards the EU, suggests an extension in the EUR/GBP downtrend," he adds.

On Wednesday, Trump announced, "We’re going to be doing a 25% tariff on all cars that are not made in the United States. We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth, taking a lot of things that they’ve been taking over the years."

Vehicle tariffs would be collected starting at 12:01 a.m. Washington time on April 03.

Pound Sterling Recovers Against Euro & Dollar, Helped by Tariff News_1

Above: GBP/EUR has met and exceeded our Week Ahead Forecast target.

The White House said the tariffs would apply not only to fully assembled cars but key automobile parts, including engines, transmissions, powertrain parts and electrical components. Tariffs on parts will take effect no later than May 3.

These latest tariffs will be particularly harmful for Mexico, Japan, Canada and the EU, which account for the largest exporters of vehicles and components to the U.S.

Foreign exchange markets are relatively calm following the developments, suggesting heightened anticipation of the April 02 tariff calls, which will be far more wide-ranging and net many more countries.

For now, the FX market is betting tariffs are a negative for the Dollar as they will impose greater costs on U.S. consumers, while Trump's ad-hoc policy approach, which is primarily conducted through social media, is hammering consumer confidence.

On Tuesday, the Conference Board said forward-looking expectations amongst consumers had plummeted to a 12-year low, taking it to levels consistent with recession.

Pound Sterling Recovers Against Euro & Dollar, Helped by Tariff News_2

Although the Dollar looks to be struggling under tariffs, some major investment banks are holding out for gains in the second quarter, betting that the pendulum will swing once again.

Analysts at Citi and JP Morgan are the latest to think the U.S. currency could be set for a rebound in the coming weeks as the U.S. massively expands its tariff programme on April 02.

"We maintain our forecasts for a USD rebound in Q2," says Daniel Tobon, a currency analyst at Citi. "Tariff risks look underpriced and we expect USD undervaluation to correct on a hawkish April 2 announcement."

"A 10% pts increase in tariff rates would result in 5% strengthening in the broad dollar index," says Arindam Sandilya, an analyst at JP Morgan.

There is also uncertainty as to whether or not the UK could be in for a shock as the April 02 tariffs will target so-called non-trade barriers such as Value Added Tax.

Trump says VAT is unfair to U.S. exporters, which brings the UK into scope for tariffs on April 02.

Until now, the assumption has been that tariffs aren't really a concern for the UK, given its balanced trade in goods with the U.S. But the unpredictability of the Trump White House could soon challenge that assumption.

If the Pound is proving a hedge against tariff noise now, that could change next week if the UK's already poor economic growth outlook takes a knock from unexpectedly large tariffs.