By TraderVox.com
Tradervox.com (Dublin) – Economic reports from the UK are pointing to a deepening recession in the country, pushing the ten-year gilts by five basis points last week. Speculations of deepening recession in the country have increased fears of monetary stimulus expansion. In a statement last week, the British Chambers of Commerce indicated that the Bank of England would expand its bond buying program this year. The Confederation of British Industry had indicated the same week that UK’s economy is likely to shrink for the first time since 2009 in 2012. UK gilts’ advance was also supported by Federal Reserve Bank Chairman, Ben Bernanke’s comments that he will not rule out quantitative easing measures it efforts to boost economic growth in the country.
Comments by the British Chambers of Commerce came at a time when the UK economy is deteriorating and, according to Nick Stamenkovic of RIA Capital Markets Ltd, the backdrop of economic picture remains poor despite some positive sentiments for gilts in the short term. Nick indicated that it is prudent for the BOE to keep the doors open for the expansion of the bond buying program. Speculations about expansion of bond buying program came after a report showed that consumer sentiment index remained at -29 points in August according to GfK NOP ltd. This was worse than the market expectation which was an increase to minus 27.
According to a BBC report, the Bank of England is expected to increase the bond buying kitty to 425 billion pounds this year from the current 375 billion. The report also indicated that the bank would hold this level up until 2014 when it would start to review the interest rates upwards. Another report by the British Retail Consortium showed that the UK retail sales dropped by 0.5 percent from July’s 0.1 percent gain. The final report will be released on September 4 and the bank of England will announce its monetary policy decision two days later where it is expected to keep the interest rates unchanged.
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