Tuesday, 25 October 2016

It's Heathrow, but not Gatwick

So it has finally happened, a new runway maybe eventually get built at Heathrow after 7 years of dithering by various Governments. I can't say May is hesitant as Prime Minister.


Clearly, the UK needs more airport capacity in the South East, but why restrict it to Heathrow is beyond my ken. It is a very statist decision and there was a much more market based route of allowing competition that could have been taken. I guess this way the impact is felt now and in limited constituencies.


On the other hand, UK Gilt 10 Years bonds, although at near record lows thanks to QE, have gained 38 basis points in a month. Still they sit 35 points down on one year, but they are creeping up. Just as the Government decides on a nice big fat investment splurge for the future. the irony being we are doing this at the end of the low interest cycle when even Ed Balls was saying do it at the beginning of the cycle.


Still, 3 elections away before any of these issues (or indeed, projects) come home to roost.

13 comments:

Timbo614 said...

Who or what says we at the end of a low interest cycle tiny bond movements are these interest rate "green shoots"? Much as I would like that, being close to retiring with the usually spouted baby boomer cash in the bank, I doubt that we are. This time it's different.

Steven_L said...

It's never 'different' this time. There is no 'new paradigm'. But having said that, how long did deflation in the USA go on for after the 1929 crash? How many years has Japanese ZIRP / QE been in play now? What is the 'natural price' of fiat money?

Blue Eyes said...

Timbo is right, now is probably the wrong point in the cycle for a big splurge on big builds. But by the time the challenges and other nonsenses come through and we have had an election over the issue then we might be in quite a different point!

Electro-Kevin said...

FFS - More Heathrow Expresses getting in the way at Airport Junction !

Blue Eyes said...

There is something west of Heathrow? News to me.

DJK said...

Statist? Mrs May's hero is Austin Chamberlain. Anyway, only the state can balance the advantages of airport expansion against the uncosted negative externalities of extra noise and congestion.

Steven_L said...

now is probably the wrong point in the cycle for a big splurge on big builds

Since when did you start believing the government should only build / allow thew building of 'big things' as part of a wider policy of guessing / managing business and credit cycles?

If something is worth building on a cost / benefit basis, then it is worth building on a cost / benefit basis, regardless of what your crystal ball tells you is about to happen to bond prices / interest rates / credit growth / gdp and the rest of it.

James Higham said...

Still, 3 elections away before any of these issues (or indeed, projects) come home to roost.

By which point, some of us will be too old to care.

CityUnslicker said...

SL _ As I said, I don't believe the Govt should do it this way, it is offensive to leave the market out.

However, IF you insist on doing it, it would have been a better idea to start as the yield curve was bottoming out, not starting to slope up.

Everyone has forgotten the deficit, it will come back to bite us yet.

Steven_L said...

IF you insist on doing it, it would have been a better idea to start as the yield curve was bottoming out, not starting to slope up.

How do you know that was the bottom of the yield curve a couple of months back? You are speculating / guessing it was.

Lots of people lost their shirts betting they had picked 'the bottom of the yield curve' on Japanese government bonds didn't they? Aka "the widowmaker" trade. The central bank kept intervening.

Then there were all those spread-betters that bankrupted themselves overnight betting they had picked 'the bottom' of the Euro against the Swiss Franc. Again, the central bank intervened.

Back in late June / early July UK government bond prices rose to record highs on (correct) speculation the central bank was going to start buying them. Since then bond prices have softened a bit. A 10 year yield 1%, a 30 year yields a whole 1.7% - some yield curve!

Now you are speculating that this is the end of central bank intervention in the gilt market. And well it might be, but you are speculating it is!

As for the deficit, it looks to me like Brexit has given them room to breathe a sigh of relief and forget balancing the books. They will either monetise the deficit and let the numbers on UK bank notes and in estate agents windows get bigger or they will rack up external debts and allow interest rates to rise and house prices to fall.

Which do you think the politicians will choose?

Good luck with speculating they will cease central bank monetisation, and please remember to use a stop loss.

adham said...


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adham said...


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adham said...


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