UK Inflation Expectations Rise Above 2% Target While UK 10Y REAL Sovereign Yield Remains In Negative Territory



Core CPI YoY for the UK has been rising.


And the REAL 10Y sovereign yield remains in negative territory.


Now how did they do that?



ECB And Draghi Keep Rates At Zero, Downgrades 2018 Inflation To 1.2% (To Infinity … And Beyond!)

The European Central Bank (ECB) President Mario Draghi is mimicking Buzz Lightyear from Pixar’s Toy Story: “To Infinity and Beyond!” That is, Draghi announced today that the ECB is keeping their key rates at 0%, 0.25% and -0.40%.

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.


And like the US, the measured inflation rate in the Gyrozone is forecast to be 1.2% in 2018 and 1.5% in 2019.


Of course, “Super Mario” thinks everything is beautiful in the European Zone. Although of the big three (Germany, UK and France), only Germany has YoY GDP growth of over 2%.


The good news? The number of EMEA (Europe, Middle East, Africa) countries with negative 2 year sovereign yields stayed at 19.


But the Central Banks are engaged in a monetary form of “Dueling Banjos”


Or as Mario Draghi says, “To infinity … and beyond!” for ECB monetary policy.

Infinity and Beyond

Fintech Fry-up: UK’s Subprime Lender Provident Declines 70% Overnight As Move To iPads For Door-to-door Sales Force Founders

UK subprime lender Provident experienced a 70% decline in their stock price overnight as earnings plummet and an investigation in launched.  Their CEO Peter Crook (no kidding) has resigned. Crook, who was CEO for a decade, said in June that many of its 4,500 salesmen and debt collectors quit or stopped working as hard when they were informed they would be replaced by a smaller number of iPad-toting full-time staff.

Here is Provident’s earnings-per-share plunge (red line) and the crash in their stock price. The company now expects a “pre-exceptional” loss for the home credit business of between 80 million pounds ($103 million) and 120 million pounds. It predicted a 60 million-pound profit as recently as June, when it issued a profit warning as loan sales and debt collections plunged. Wolstenholme said in the statement that it will take “an elongated period of time” to turn the division around.


And here is Provident’s stock price compared to Royal Bank of Scotland’s  stock price to highlight RBS’s decline around the global financial crisis and Provident’s rise then decline.


Provident is similar in spirit to the Netflix show “White Gold” about British door–to-door vinyl window and door replacement sales in the 1980s. Yes, the UK still has door-to-door subprime lenders, now using FINTECH (sort of) in the form of iPads.

From Provident’s webpage: “Representative example: £270 loan over 26 weeks. 26 payments of £16.20 per week. Rate of interest 112% p.a. fixed. Representative 535.3% APR. Total amount payable £421.20.”

Yes, Provident really does sound like Netflix’s White Gold except for personal loans from  £100 – £1,000.