WEBVTT - Japan's Bond Market in Focus 

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news.

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<v Speaker 2>Welcome to the Mertain Talks, Money Markets, roundup debrief on

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<v Speaker 2>the biggest stories in markets and economics. As I'm sure

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<v Speaker 2>you've already walked to, I'm joined Stebeck, senior report and

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<v Speaker 2>author of my distilled newsletter, and that most of the

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<v Speaker 2>day's show. While Marrin is out on holiday for a change,

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<v Speaker 2>it's not me with me is longtime friend of the

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<v Speaker 2>show and usefully our government boinds. Go to a guy,

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<v Speaker 2>Marcus Ashworth. Marcus is a Bloomberg opinion columns covering European

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<v Speaker 2>markets and is also our go to guy for all

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<v Speaker 2>things bond related. Marcus, Nice to see again. How's it going?

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<v Speaker 1>What always a pleasure?

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<v Speaker 2>Yes, I'll buy you lunch one of these days. Up

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<v Speaker 2>in these coins? Yeah?

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<v Speaker 1>All the rage or not?

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<v Speaker 2>Actually, what's been going on?

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<v Speaker 1>Sure? Well, it's the second largest bond market in the

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<v Speaker 1>world after US treasuries, and it's obviously the proud owner

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<v Speaker 1>of the largest sort of government debt GDP ratio as well.

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<v Speaker 1>So the Japanese government market has been a backwater in

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<v Speaker 1>the sense of foreign investors for many many years.

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<v Speaker 2>That is very.

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<v Speaker 1>Much owned by the Japanese sure as pension funds and

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<v Speaker 1>particularly Bank in Japan itself, so it owns a lot

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<v Speaker 1>of its own debt, so it's all great, big sort

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<v Speaker 1>of money round about. Nonetheless, we start to have noticeable

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<v Speaker 1>inflation in Japan after many decades of deflation and certainly

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<v Speaker 1>very sort of stagnant growth. But you know, the Japanese

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<v Speaker 1>economy fits the starts are doing quite well. In nominal terms,

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<v Speaker 1>it's growing at five percent, but you take inflation way,

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<v Speaker 1>which is sort of three percent and above and below,

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<v Speaker 1>depending how you look at it. It's perhaps a problem

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<v Speaker 1>now that inflation is coming through the Bank of Japan

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<v Speaker 1>is very reluctant to raise interit traits, but it is

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<v Speaker 1>slowly but very carefully. It just wants to see make

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<v Speaker 1>sure that deflation has finally finally gone away. But there

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<v Speaker 1>are some some nasty signs, which has meant essentially that

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<v Speaker 1>demand for long, long dated debt in Japan, which once

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<v Speaker 1>was a clam out. All these pretension funds used to say,

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<v Speaker 1>I'm forced to buy US treasuriescause of the year, because

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<v Speaker 1>I don't get anything in Japan. Please please put you

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<v Speaker 1>put yields up. Well, now they've got it. They don't

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<v Speaker 1>want it anymore, and that's largely because they've got enough,

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<v Speaker 1>and the Bank of Japan is no longer buying all

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<v Speaker 1>of jgb's that are sweeping up all the loose bits.

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<v Speaker 1>They are trying to passively quantitative titan, which is in essence,

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<v Speaker 1>they're not buying everything that matures in the sense of

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<v Speaker 1>rebuying investing in back of the market. They're slowly but

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<v Speaker 1>very steadily decreasing the matter on their own balance sheet. Well,

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<v Speaker 1>no one's really there to buy it now. Ironically, foreigners

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<v Speaker 1>have been a little bit more active in the last

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<v Speaker 1>few months, seeing yeals going high and they thinking, well,

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<v Speaker 1>let's have a little bit of that. Unfortunately, they've had

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<v Speaker 1>nothing but bad news since they've been getting involved. But

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<v Speaker 1>you know, we really don't have much of a structural

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<v Speaker 1>demand for the long end of Japan. And we've had

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<v Speaker 1>a couple of rubbish auctions. We had a twenty year

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<v Speaker 1>previous week and forty year this week, neither of which

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<v Speaker 1>have gone at all.

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<v Speaker 2>Well, however, and just one thing so very quick, so

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<v Speaker 2>just to be clear, and the auction is when the

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<v Speaker 2>government goes out for the first time and tries to

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<v Speaker 2>borrow the money hasn't it all says we're wating a

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<v Speaker 2>forty year I owe you appeal for it. It was

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<v Speaker 2>like an ip A for equities.

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<v Speaker 1>Yeah, they're just issuing new government debt across different points

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<v Speaker 1>on their yell curve from two years out to forty years,

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<v Speaker 1>and they have a schedule which comes up and they

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<v Speaker 1>do anyway, So they they've they've been. You know, as

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<v Speaker 1>all government bonds are sort of well documented when they

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<v Speaker 1>will be issuing, the government will be selling more of them.

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<v Speaker 1>It just depends how many people turn up to buy it. Now,

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<v Speaker 1>normally you'd expect to see at least two to maybe three,

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<v Speaker 1>four five or purposing more times cover. These are well

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<v Speaker 1>flagged liquidity events where you want to buy something that

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<v Speaker 1>you can get to buy a lot of bit at

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<v Speaker 1>one time and get a fairly clear and open price.

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<v Speaker 1>But you know, forty years is a very very long

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<v Speaker 1>maturity and it's a very specialist market. It's only really

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<v Speaker 1>sort of life insurers and pension funds. You might really

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<v Speaker 1>want to buy these things. Anyways. The last couple of

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<v Speaker 1>longer ended auctions have done poorly in relative terms, which

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<v Speaker 1>has brought out a lot of panic, some very sharp

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<v Speaker 1>ye'll moves higher. However, one thing I have many many

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<v Speaker 1>years of trading Japanese government bond's best part of thirty

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<v Speaker 1>five years is not longer. There is always a saying

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<v Speaker 1>he's been known as the widow maker trade trying to

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<v Speaker 1>short jjb's is it falls out. However, you know this

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<v Speaker 1>is because the Japanese authorities are fairly canny when it

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<v Speaker 1>comes to looking after their own market. And they've looked

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<v Speaker 1>like they pulled another stunt, which is they've sent around

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<v Speaker 1>a questionnaire the Ministry of Finance. This is to all

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<v Speaker 1>the various different primary dealers, the main main Japanese. They've

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<v Speaker 1>done one dealers and said how much would you like

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<v Speaker 1>in future? I would you like a lot less? So

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<v Speaker 1>everyone's read between the lines, Oh, they're going to cut

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<v Speaker 1>all the size of all these sales and essentially the

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<v Speaker 1>issue short dated bonds, and that sort of worked a

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<v Speaker 1>bit of its magic. Nonetheless, unfortunately another auction went badly,

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<v Speaker 1>so we we're back, you know, in the mar again.

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<v Speaker 1>But you know, definitely yields are a lot higher than

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<v Speaker 1>they were, seismically higher, and that is a very important

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<v Speaker 1>international thing to watch.

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<v Speaker 2>That sounds good. Just before we get to that certainly

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<v Speaker 2>I understand it is that one of the reasons the

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<v Speaker 2>mind for long dated points like everywhere was high is

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<v Speaker 2>because investos basically, but an an environment, we have the

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<v Speaker 2>thought interest rates and we're going to keep going down

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<v Speaker 2>and deflation was going to continue to be in this

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<v Speaker 2>you And what is harpened since COVID and infleetion took

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<v Speaker 2>off is that that psychology has been destroyed. And also

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<v Speaker 2>obviously inflectionent has going up, so you know, you need

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<v Speaker 2>to get paid for taking the risk where as you're

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<v Speaker 2>dead in before. How much of that is the case

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<v Speaker 2>and how much is it something more structural? It's like,

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<v Speaker 2>did these pension funds not need twenty immaturities anymore? Why

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<v Speaker 2>is that?

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<v Speaker 1>All you said is correct? However, the brutal reality is

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<v Speaker 1>is that the Bank of Japan is not buying as

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<v Speaker 1>much as it used to buy. Owns fifty six percent

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<v Speaker 1>of the entire issuance, and it's trying to reduce that

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<v Speaker 1>and there aren't enough buyers to replace it. It's nothing more,

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<v Speaker 1>nothing less. Demand you know, is lower than supply at

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<v Speaker 1>the moment, there's.

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<v Speaker 2>More salers than buyers.

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<v Speaker 1>Well, yes, there's no buyers. It is not that many sellers,

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<v Speaker 1>but there's no bars at all, so you know, you

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<v Speaker 1>just get to you and often the Japanese gun mole

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<v Speaker 1>market is moribun and it doesn't even trade. It's very

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<v Speaker 1>much by appointment and it's held by very well known

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<v Speaker 1>people that you know, we don't necessarily want to add

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<v Speaker 1>to anything more at the moment, and that's we've got

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<v Speaker 1>this situation whereby if the government comes in to try

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<v Speaker 1>and sell something and no one turns up, in effect,

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<v Speaker 1>or not enough people turn up, the market just doesn't

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<v Speaker 1>want to know. Yeal goes high and higher, the price

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<v Speaker 1>goes low and lower, until eventually this authorities have to

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<v Speaker 1>do something, and that's what they've sort of done by

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<v Speaker 1>begging a big signal. They probably might sell some less,

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<v Speaker 1>but we shall see.

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<v Speaker 2>Moving over from Japan, how does this affect the rest

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<v Speaker 2>of the world right or the US market?

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<v Speaker 1>Has it explained? I mean, Japanese bon yields and interest

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<v Speaker 1>rates have traditionally been very very low, so it's been

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<v Speaker 1>the main home and source of what's known as the

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<v Speaker 1>carry trade, which is a hard thing to understand. Basically,

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<v Speaker 1>what people are doing is they're borrowing in yen and

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<v Speaker 1>then using that money cheaply to buy higher yielding, more

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<v Speaker 1>exciting assets like US text docs for instance, or of

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<v Speaker 1>US bonds. But I know, so a lot of the

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<v Speaker 1>international flows are dependent on liquidity from borrowing in yen.

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<v Speaker 1>If all of a sudden that be comes a lot

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<v Speaker 1>more expensive as has been, it unravels a lot of

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<v Speaker 1>other types of trades. So it is essentially, you know,

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<v Speaker 1>a storm in Japan can can have material effects elsewhere

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<v Speaker 1>at the same time, as we're seeing a sell off

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<v Speaker 1>in US bond yields, particularly the long end as well,

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<v Speaker 1>and indeed in the UK we can come over to

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<v Speaker 1>the UK in the moment. But I mean principally, we're

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<v Speaker 1>worrying here about the big floats between dollars and Japanese yen,

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<v Speaker 1>and that the authorities in Japan are very worried about

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<v Speaker 1>one the yen weakening too much or indeed strengthening too much.

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<v Speaker 1>That doesn't want to gradual That the yen is very

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<v Speaker 1>is very cheap in relative terms of the dollar, but

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<v Speaker 1>slowly and steadily they want that maybe it to be

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<v Speaker 1>less so, but they want no sharp moves, so that

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<v Speaker 1>means no shot moves and interest rates preferably and indeed

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<v Speaker 1>in their own bond yields. So let's learne there's stock market.

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<v Speaker 2>So this is what I'm the last August, doesn't it

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<v Speaker 2>when we had that brief period of panic when the

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<v Speaker 2>yen got a lot stronger, very suddenly, exactly because.

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<v Speaker 1>That was everyone who to a big export county like Japan,

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<v Speaker 1>they are planning forward. You know, if you're going to

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<v Speaker 1>sell lots of toyotas, you need to know where where

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<v Speaker 1>your FX risk is, and so everything has to be done,

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<v Speaker 1>you know, preferably in a very calm and careful manner.

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<v Speaker 1>So sharp moves are not appreciated, particularly by Japanese authorities,

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<v Speaker 1>but it's because it does upset the attle cart elsewhere

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<v Speaker 1>as well. And quite clearly, the Trump administration is in

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<v Speaker 1>the middle of are doing trade negotiations with Japan. Japan's

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<v Speaker 1>government isn't quite a rocky place at the moment, so

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<v Speaker 1>the last thing they want to be seen is manipulating

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<v Speaker 1>their currency. And as far as the US authorities are concerned,

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<v Speaker 1>but they obviously are going to have to do a

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<v Speaker 1>fairly important and probably painful trade deal with the US

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<v Speaker 1>because they obviously export an awful lot. Though they're no

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<v Speaker 1>longer happened to the world's largest credit to nation. That's

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<v Speaker 1>that's not being handled across the journey, according to the

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<v Speaker 1>latest Japanese Ministry of Finance details. But I mean point

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<v Speaker 1>is that Japan sells a lot into the US. Its

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<v Speaker 1>currency rate has been very weak. It's be very advantageous

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<v Speaker 1>for its exporters. They don't want that to change true ratically.

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<v Speaker 2>Because honestly, one issue with interest rate is going up

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<v Speaker 2>is the borrowing more expensive. So I mean is we'll

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<v Speaker 2>take this to the UK now because obviously that's where

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<v Speaker 2>most of our listeners are living and where their mortgages

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<v Speaker 2>are and things like that. What is the knock on

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<v Speaker 2>impact to the UK If there is a knock on

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<v Speaker 2>impact because obviously long boinds here are going the yields

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<v Speaker 2>are going up to what does all of that mean

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<v Speaker 2>for the public finances and for what's likely to happened

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<v Speaker 2>with the bank at England rate and mortgages and things

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<v Speaker 2>like that is.

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<v Speaker 1>Not good news. But I mean, what we're saying in

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<v Speaker 1>Japan is very similar to what we're seeing in the UK.

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<v Speaker 1>We had the scare with the sort of lit trust instance,

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<v Speaker 1>which was really more down to pension funds and the

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<v Speaker 1>bond buying strategies called liability driven investing. I'm going to

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<v Speaker 1>the money.

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<v Speaker 2>Thank you, because I've gone into that a number of

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<v Speaker 2>times on this podcast, and you're one of the few

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<v Speaker 2>people that actually confirms that that is what it was,

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<v Speaker 2>so expert here the.

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<v Speaker 1>Bank of Anything confirmed themselves two thirds of it was

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<v Speaker 1>down to LDR.

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<v Speaker 2>Yeah, exactly.

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<v Speaker 1>However, the point is is that the scare that which

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<v Speaker 1>she had around that time October twenty twenty two, three

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<v Speaker 1>years ago, has not really been how should we say, learnt,

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<v Speaker 1>And now we're finally seeing the knock on effect in Japan,

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<v Speaker 1>much much bigger than the market in the UK. But

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<v Speaker 1>it's the same basic problem. There are not enough domestic

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<v Speaker 1>long only pension fund slash insurer buyers who naturally want

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<v Speaker 1>very long data accets to match against the liabilities. There

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<v Speaker 1>aren't enough buyers in the UK either, because we have

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<v Speaker 1>our own Manu shy Of as you know, of defined

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<v Speaker 1>benefit pensions, and the requirements to that is dropping because

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<v Speaker 1>a lot of getting closed. The LDI type of buying

0:11:45.880 --> 0:11:49.439
<v Speaker 1>is disappearing at the same time as we just got structurally,

0:11:49.600 --> 0:11:53.480
<v Speaker 1>you know the demographics, but people are not living as

0:11:53.520 --> 0:11:57.280
<v Speaker 1>long there is less demand for very long dated debt.

0:11:58.200 --> 0:12:00.840
<v Speaker 1>The Debt Management Officer of the UK Treasury has done

0:12:00.920 --> 0:12:02.920
<v Speaker 1>a lot to try and get ahead of this, but

0:12:03.040 --> 0:12:05.760
<v Speaker 1>it's evident that they need to do even more. I

0:12:06.040 --> 0:12:10.120
<v Speaker 1>sell less long bonds exactly is what perhaps is happening

0:12:10.120 --> 0:12:12.120
<v Speaker 1>in Japan. This is just a very similar thing. It's

0:12:12.160 --> 0:12:16.600
<v Speaker 1>a structural domestic demand from the big institutions in both

0:12:16.640 --> 0:12:20.280
<v Speaker 1>the UK, Japan and the US is radically reduced. The

0:12:20.360 --> 0:12:22.080
<v Speaker 1>US Treasury is sort of getting ahead of it in

0:12:22.120 --> 0:12:24.640
<v Speaker 1>two ways. One, they're ishing a lot more tea bills,

0:12:24.640 --> 0:12:26.960
<v Speaker 1>which we don't really do in the UK and perhaps

0:12:27.000 --> 0:12:27.800
<v Speaker 1>we ought to do more of.

0:12:28.200 --> 0:12:30.440
<v Speaker 2>Just clearly, tea bells are basically just cash.

0:12:30.760 --> 0:12:33.360
<v Speaker 1>Yeah, they're very short money market instruments which don't offer

0:12:33.360 --> 0:12:35.959
<v Speaker 1>a coupon, but they are issued below one hundred, say

0:12:35.960 --> 0:12:38.360
<v Speaker 1>at ninety nine or ninety eight, and they're mature at

0:12:38.360 --> 0:12:41.440
<v Speaker 1>one hundred, so you get your money back by holding

0:12:41.440 --> 0:12:43.440
<v Speaker 1>it to maturity, and you get back more than you

0:12:43.480 --> 0:12:47.080
<v Speaker 1>put in. So you know, this is short data funding,

0:12:47.120 --> 0:12:50.520
<v Speaker 1>which is you know, obviously banks are very very important

0:12:50.559 --> 0:12:52.400
<v Speaker 1>in it, but you know, we don't do as much

0:12:52.559 --> 0:12:55.160
<v Speaker 1>in the UK as perhaps other countries do. The other

0:12:55.240 --> 0:12:57.960
<v Speaker 1>thing that US are doing is that the Federal Reserve

0:12:58.040 --> 0:13:03.920
<v Speaker 1>has stopped basically all all their US Treasury quantitative timing passively.

0:13:04.200 --> 0:13:06.920
<v Speaker 1>They are buying something like five billion a month, but

0:13:06.920 --> 0:13:09.480
<v Speaker 1>you know, they're hardly doing anything. So in that sense,

0:13:10.600 --> 0:13:14.760
<v Speaker 1>it's not you know, as prevalent a supply demand issue

0:13:14.760 --> 0:13:17.240
<v Speaker 1>maybe in the US by what's going on with the

0:13:17.480 --> 0:13:20.400
<v Speaker 1>Trump administration. And indeed, what the Federal Reserve is basically saying,

0:13:20.440 --> 0:13:22.280
<v Speaker 1>which is we're not going to cut interest rates very much.

0:13:23.200 --> 0:13:27.760
<v Speaker 2>But basically the fad has stopped sale and poins to

0:13:27.800 --> 0:13:29.920
<v Speaker 2>stop pail jungers, they stop.

0:13:29.920 --> 0:13:32.559
<v Speaker 1>Reducing their balanchine quiet they are quite as much as

0:13:32.559 --> 0:13:34.520
<v Speaker 1>clearly the Bank of are still doing in this country.

0:13:35.080 --> 0:13:38.559
<v Speaker 1>And we've got the highest first year you know yields

0:13:38.880 --> 0:13:41.040
<v Speaker 1>of all you know, we're five and a half percent.

0:13:41.120 --> 0:13:43.559
<v Speaker 1>And then that's that's you know, costing us, and it

0:13:43.640 --> 0:13:47.320
<v Speaker 1>costs our financing and our interest rate bill each each

0:13:47.400 --> 0:13:49.559
<v Speaker 1>year is higher and higher, and that's just obviously causing

0:13:49.679 --> 0:13:53.200
<v Speaker 1>extreme problems onto Rachel Reeves's fiscal headroom or lack thereof.

0:13:53.200 --> 0:13:56.080
<v Speaker 1>And yeah, we are not helping ourselves at the moment.

0:13:56.559 --> 0:14:00.000
<v Speaker 1>But you know, basically, lusts like Japan we've got less

0:14:00.040 --> 0:14:02.200
<v Speaker 1>demand for very long dated bonds, perhaps we should sell

0:14:02.280 --> 0:14:05.360
<v Speaker 1>even less of them for the moment anyway, So does that.

0:14:05.280 --> 0:14:10.320
<v Speaker 2>Mean presumably the idea would be we stop selling as

0:14:10.360 --> 0:14:13.280
<v Speaker 2>many long dety points and we start selling more short

0:14:13.360 --> 0:14:18.800
<v Speaker 2>detied ones sly two five to ten years. Yes, But

0:14:18.960 --> 0:14:22.160
<v Speaker 2>my question then is doesn't increase in supply at that

0:14:22.320 --> 0:14:25.240
<v Speaker 2>and then push up interest at that end as well,

0:14:25.360 --> 0:14:25.880
<v Speaker 2>or they also be.

0:14:25.880 --> 0:14:29.320
<v Speaker 1>An equal there's a lot more liquidity to much bigger market.

0:14:29.360 --> 0:14:32.520
<v Speaker 1>It's much more you know, you have a lot more

0:14:32.560 --> 0:14:35.000
<v Speaker 1>foreign interest, particularly foreign central banks don't tend to go

0:14:35.040 --> 0:14:38.400
<v Speaker 1>out beyond ten years, and obviously a lot shorter Equally

0:14:38.400 --> 0:14:42.000
<v Speaker 1>hedge funds which are very active, but in beyond sort

0:14:42.040 --> 0:14:43.400
<v Speaker 1>of the ten to fifteen year that they're gonna be

0:14:43.480 --> 0:14:46.440
<v Speaker 1>very much any relative value buying and certing strategies, you know,

0:14:46.520 --> 0:14:50.359
<v Speaker 1>doing sort of complex trades, but in the net exposure

0:14:50.400 --> 0:14:53.560
<v Speaker 1>they have will be very limited. So it's really a

0:14:53.680 --> 0:14:56.640
<v Speaker 1>very domestic market out beyond ten or fifteen years. In

0:14:56.640 --> 0:15:00.400
<v Speaker 1>the UK totally dominated it for many many years by

0:15:00.440 --> 0:15:03.960
<v Speaker 1>pension funds and insurers, and these guys have got enough

0:15:05.120 --> 0:15:07.520
<v Speaker 1>at the moment. So as I said that, don't Manager

0:15:07.560 --> 0:15:09.880
<v Speaker 1>Office has done a fantastic job up to now. However,

0:15:10.800 --> 0:15:13.920
<v Speaker 1>they perhaps need to be even more or the Treasury

0:15:14.000 --> 0:15:16.240
<v Speaker 1>needs to make come up with an even more aggressive

0:15:16.680 --> 0:15:19.240
<v Speaker 1>way of changing how we find. We find a lot

0:15:19.280 --> 0:15:22.160
<v Speaker 1>of very long dated and very much inflation linked bonds

0:15:22.200 --> 0:15:26.160
<v Speaker 1>in the last twenty thirty years, it's been fabulous for us. However,

0:15:26.320 --> 0:15:29.280
<v Speaker 1>the situation has changed and this is not where we

0:15:29.400 --> 0:15:32.760
<v Speaker 1>perhaps have natural demand which maybe go to some more

0:15:32.800 --> 0:15:35.280
<v Speaker 1>traditional and like a lot of more other bond markets,

0:15:35.280 --> 0:15:37.880
<v Speaker 1>an issue much more in the two to tenure sector,

0:15:38.240 --> 0:15:39.520
<v Speaker 1>like the US Treasury does.

0:15:39.640 --> 0:15:44.280
<v Speaker 2>Final question on this, But given all of this, what

0:15:44.520 --> 0:15:46.440
<v Speaker 2>do you think that actually does mean for the interest

0:15:46.520 --> 0:15:49.440
<v Speaker 2>rates that marld to you know, people putting us evingsway

0:15:49.480 --> 0:15:54.160
<v Speaker 2>and people taking the morgidgees. I mean because you know

0:15:54.160 --> 0:15:55.560
<v Speaker 2>where at the start of this year this sort of

0:15:55.640 --> 0:15:57.920
<v Speaker 2>Bank England, the were people thinking, oh, you know, we

0:15:57.960 --> 0:15:59.560
<v Speaker 2>may have fee and a half percent by the end

0:15:59.600 --> 0:16:04.320
<v Speaker 2>of the year. Are but that would be like that

0:16:04.320 --> 0:16:06.920
<v Speaker 2>would be the same really has become an inflation rate

0:16:06.960 --> 0:16:09.840
<v Speaker 2>pretty much and that strikes me as a bit and

0:16:10.000 --> 0:16:13.760
<v Speaker 2>lately note but I don't know what viewing that well.

0:16:13.640 --> 0:16:16.640
<v Speaker 1>We haven't helped ourselves by you know, raising the minimum wage,

0:16:17.200 --> 0:16:21.680
<v Speaker 1>raising a lot of public sector wage rises, and obviously

0:16:21.960 --> 0:16:25.920
<v Speaker 1>huge tax hikes you know, national insurance contribution to employers

0:16:25.960 --> 0:16:27.840
<v Speaker 1>and things like that which have forced a lot of

0:16:27.840 --> 0:16:32.480
<v Speaker 1>things higher. We do have you know, a bump at

0:16:32.480 --> 0:16:34.720
<v Speaker 1>the moment because of energy prices which will go away,

0:16:34.880 --> 0:16:37.120
<v Speaker 1>and there's a number of things which would would lead

0:16:37.160 --> 0:16:39.000
<v Speaker 1>to you think that probably over the course of the

0:16:39.040 --> 0:16:42.240
<v Speaker 1>next six months a year, that inflation will come back

0:16:42.320 --> 0:16:45.720
<v Speaker 1>down again. Nonetheless, you know, really the Bank of England

0:16:45.760 --> 0:16:47.160
<v Speaker 1>is of the opinion at the moment that doesn't do

0:16:47.200 --> 0:16:49.800
<v Speaker 1>anything until it's absolutely proven that that they have got

0:16:49.840 --> 0:16:52.200
<v Speaker 1>on top of inflation, and they are clearly more worried

0:16:52.200 --> 0:16:53.840
<v Speaker 1>about it than perhaps a lot of in the market

0:16:53.920 --> 0:16:57.640
<v Speaker 1>had thought, because we expect the economy to be pretty

0:16:57.640 --> 0:17:01.120
<v Speaker 1>soft now as we know. The first was strong optically

0:17:01.160 --> 0:17:05.440
<v Speaker 1>because a lot of inventory build ahead of obviously the tariffs.

0:17:06.480 --> 0:17:08.720
<v Speaker 1>That's not necessarily going to last very long. So growth

0:17:08.720 --> 0:17:09.879
<v Speaker 1>for the rest of the year in the UK is

0:17:09.880 --> 0:17:11.640
<v Speaker 1>probably not going to be that great. If it's any

0:17:11.680 --> 0:17:15.040
<v Speaker 1>weaker than the Bank of unexpects, then maybe we'll see

0:17:15.040 --> 0:17:17.000
<v Speaker 1>the Bank of It be a little bit more aggressive

0:17:17.359 --> 0:17:20.320
<v Speaker 1>on rate cuts. But They really want to see two things.

0:17:20.800 --> 0:17:23.760
<v Speaker 1>Evident economic weakness, of which we're not really seeing at

0:17:23.760 --> 0:17:27.280
<v Speaker 1>the moment. That there are some worries in the labor markets.

0:17:27.359 --> 0:17:31.320
<v Speaker 1>It's obviously the statistics. We got quality of them as parlors,

0:17:31.359 --> 0:17:33.960
<v Speaker 1>so we don't really have much visibility on that. And

0:17:33.960 --> 0:17:35.720
<v Speaker 1>they're not taking your risk until they feel they've got

0:17:36.280 --> 0:17:39.800
<v Speaker 1>controversial evidence that we're in recession or something like that,

0:17:40.200 --> 0:17:42.680
<v Speaker 1>and until they're seeing inflation. You know, I actually properly

0:17:42.720 --> 0:17:44.760
<v Speaker 1>turned the corner and go back down again towards at least,

0:17:44.880 --> 0:17:48.000
<v Speaker 1>you know, evidently back towards the two percent target. Anything

0:17:48.000 --> 0:17:49.800
<v Speaker 1>above three three and a half percent, which you're sort

0:17:49.800 --> 0:17:51.639
<v Speaker 1>of seeing the moment is you know, no go for them.

0:17:52.440 --> 0:17:55.119
<v Speaker 1>They're not going to tighten or raise interest rates, but

0:17:55.119 --> 0:17:57.480
<v Speaker 1>they're not going to rush too. So you know, we

0:17:57.600 --> 0:17:59.439
<v Speaker 1>might get one in August, but that's looking like a

0:17:59.480 --> 0:18:02.399
<v Speaker 1>coin flip, so we may get another one before the

0:18:02.480 --> 0:18:05.080
<v Speaker 1>end of the year. But you know, look, I never

0:18:05.680 --> 0:18:08.000
<v Speaker 1>would have thought this, but there is a possibility we

0:18:08.119 --> 0:18:11.000
<v Speaker 1>may have got nothing until until next year. But as

0:18:11.000 --> 0:18:13.359
<v Speaker 1>I said, unless we get some further clarity both on

0:18:13.440 --> 0:18:17.520
<v Speaker 1>inflation indeed on how the economy is faring, I don't

0:18:17.520 --> 0:18:19.200
<v Speaker 1>think the Bank of England is gonna be our friend here.

0:18:20.280 --> 0:18:24.000
<v Speaker 2>It really is great. Well, thank you very much Marcus.

0:18:24.080 --> 0:18:28.800
<v Speaker 2>As always, that was extremely enlightening and much very much

0:18:28.880 --> 0:18:29.679
<v Speaker 2>pre city coming on.

0:18:30.359 --> 0:18:32.720
<v Speaker 1>Well job, Thanks very much you for having me. Was

0:18:32.800 --> 0:18:33.240
<v Speaker 1>enjoy it.

0:18:38.320 --> 0:18:40.680
<v Speaker 2>Thanks for listening to this week's Melton Talks Money Debrief.

0:18:40.720 --> 0:18:43.480
<v Speaker 2>If you like our show, rate review and subscribe. Whatever

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<v Speaker 2>you listen to podcasts, please make it five stars. Also

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<v Speaker 2>be sure to follow me on exit, join Underscore, Stepic

0:18:50.240 --> 0:18:54.800
<v Speaker 2>and Merin Maren s w follow Marcus at Marcus Ashwood.

0:18:55.320 --> 0:18:58.560
<v Speaker 2>This episode was produced by Moses and Summer Sadi and

0:18:58.640 --> 0:19:01.480
<v Speaker 2>tala Amadistions and comments on this show and all our

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<v Speaker 2>shows are always welcome. Our show email is merin Money

0:19:04.359 --> 0:19:06.000
<v Speaker 2>at bloombard dot net