Wednesday, April 24, 2013

Market Update from Mike Kuta " The Squawk Trader " Part 1

April 24, 2013
BOE Expands Credit-Boosting Program as Small Firms Targeted.
The Bank of England will extend by one year its plan to provide cheaper loans to companies and consumers and increase incentives to get funds to smaller firms, enhancing a nine-month-old program to aid the economy. The Funding for Lending Scheme will now last until January 2015, make loans to small companies more attractive and be open to non-bank lenders, the BOE and the Treasury said in London today. While credit conditions have improved since the FLS started, “there remain risks of renewed stresses in bank funding markets” because of the euro-area crisis, they said. Chancellor of the Exchequer George Osborne and BOE Governor Mervyn King are expanding the program on the eve of economic statistics that may show Britain’s economy was close to an unprecedented triple dip in the first quarter.  The announcement also precedes an audit of the U.K. by the International Monetary Fund, whose delegation visits London next month after the fund said Osborne should ease his austerity plan to aid growth. The FLS revamp will give banks “continued assurance against the risk that market funding rates increase, especially in the light of continued uncertainty in the euro area,” King said in a letter to Osborne. It will “help to maintain easier funding conditions for banks into 2015, and thereby help to support credit conditions and the recovery.”
QE Outlook:
The move comes as BOE policy makers split on whether to increase their quantitative-easing program. The Monetary Policy Committee kept its QE target at 375 billion pounds ($572 billion) on April 4 as a push by King and two other officials was defeated by a majority on the nine-member panel. Royal Bank of Scotland Group Plc (RBS) said today’s FLS extension may lower the probability of future bond purchases. U.K. government bonds opened little changed, leaving 10-year yields at 1.71 percent as of 8:04 a.m. London time. The yield on two- year notes was at 0.26 percent. “Focusing the BOE easing bias towards targeted credit measures means the need for more gilt purchases is less pressing,” RBS analysts Simon Peck and Andrew Roberts said in an e-mailed note to clients. They also said the “immediate follow through on bank funding costs is likely to be less pronounced than the launch of the original FLS.”

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http://sweetfutures.com/2013/market-update-from-mike-kuta-the-squawk-trader-part-1-2/

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