00:00What else are we looking at? I mean, I know we spent a lot of time talking about the UK budget last week, which was, you know, it got a lot of people, or certainly it wasn't seen as fair by a lot of people, is how I would put it.
00:12You know, six days afterwards, what's your take?
00:15Bearish currency. We think that the rally in the pound that we had before the budget was a short squeeze, but the medium term picture we think for the pound is not a good one.
00:23There's two elements to it. One is political uncertainty. The market needs to price a bit of a political tail that is a downside risk for the pound.
00:31And the second is Bank of England. We think the market should price lower terminal policy rates from the Bank of England.
00:36Right now, the market's only expecting two more cuts. We think it's likely we'll get those two cuts December and then early next year.
00:43But then the risk into 2027 is they cut rates twice more. For bonds, the picture's quite different, though.
00:48We actually like duration in the UK compared to some of the other markets, which I believe is quite out of consensus.
00:54The element here is that lower terminal rates should support fixed income.
00:58And supply in the UK, we expect next year to fall perhaps as much as 50 billion, which is a lot for the UK.
01:05It's about 20 percent. So you have lower terminal Bank of England expectations accompanied with lower supply.
01:10It can support UK duration on a cross market, for example, against Germany, who we think are going to be doing massive fiscal, more than the market expects next year.
01:18So where do you buy? Are you buying bonds?
01:21We'd buy bonds 10-year versus Germany. And we'd receive the front end of the UK curve as well.
01:28What's the markets telling us about the UK today, Moina?
01:30Well, today things are not looking great on the equities front, although actually the FTSE 100 is doing better than other European stocks,
01:37which is often the case when there's a kind of broader risk-off mood.
01:41But looking at the pound, I think, you know, to Sam's point, we have seen some weakness.
01:45We're falling again a bit closer towards $1.32.
01:49And that does seem to me to imply that there's just a lack of enthusiasm from the budget.
01:58There's no real sort of upward driver.
02:01And that is, you know, we're seeing the pound, the worst performing, you know, G10 currency today.
02:06Okay. So there's that. And then also in the gilt market, yields are actually a bit higher across the curve.
02:12But that is also in line with what's happening in the rest of Europe.
02:15But I think, you know, longer term, we did see the 30-year yield coming down quite a lot after the budget.
02:21And I think that that does definitely play into the messaging of the budget, which was, okay, they've sort of shored up the fiscal, you know, balance sheet for the government.
02:30But there's not really a huge amount of growth that's being built in there.
02:36So there's not a lot for the currency.
02:38There is that stability that the gilt market wanted to see.
02:41And I think that with today's sort of morning reaction put aside, that is what we're seeing starting to come through in the markets.
02:49But there is a lot of uncertainty because it's quite a sort of sort of niggly budget to properly digest.
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