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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