UK inflation slows down, Renault cancels EV IPO, BOE probes private credit, US bonds rally

The UK inflation rate dropped to 3.9% in November, down from 4.2% in October, as the pressure from transport, recreation, and food prices eased. The slowdown was sharper than expected by analysts, who had forecast a 4.1% rate. The core inflation rate, which excludes volatile items such as energy and food, also fell to 3.1% from 3.4%.

The lower inflation rate was welcomed by consumers and businesses, who have been struggling with the rising cost of living and the supply chain disruptions caused by the pandemic and Brexit. The inflation rate is still well above the Bank of England’s 2% target, but the data suggests that the peak may have passed and that the inflationary pressures may be transitory, as the BOE has argued.

UK inflation
UK inflation

Renault scraps plans to list EV unit

Renault, the French carmaker, has abandoned its plans to spin off and list its electric vehicle and software unit, Ampere, citing unfavorable market conditions and a lack of investor appetite. The company had announced the IPO in September, hoping to raise up to €2 billion and to boost its valuation and competitiveness in the EV market.

However, the plan faced several challenges, such as the slowdown in EV demand, the regulatory uncertainty, the competition from other carmakers, and the skepticism from analysts and investors. Renault said that it did not need the IPO proceeds, as its cash generation had improved and its debt had decreased. The company also said that it would continue to invest in its EV and software strategy, and that it would explore other options to create value for its shareholders.

BOE investigates private credit market

The Bank of England is looking into the potential risks and benefits of the private credit market, which has grown rapidly in recent years and now accounts for $1.6 trillion of assets globally. Private credit refers to loans that are made by non-bank lenders, such as hedge funds, private equity firms, or insurance companies, to borrowers that are not listed on public markets, such as small and medium-sized enterprises, infrastructure projects, or real estate developers.

The BOE said that it was interested in understanding the size, structure, and dynamics of the private credit market, and how it could affect the financial stability, the monetary policy, and the economic growth of the UK. The BOE also said that it was concerned about the potential for systemic risk, as the private credit market could be vulnerable to shocks, such as changes in interest rates, liquidity, or credit quality. The BOE has launched a survey and a consultation with the private credit industry, and plans to publish its findings in the second half of 2024.

US bonds rally after Treasury lowers borrowing estimate

US government bonds rallied on Monday, after the Treasury Department said that it would borrow less than expected in the first quarter of 2024. The Treasury said that it would borrow $760 billion in the January-March period, down from the $816 billion that it had projected in October. The lower borrowing estimate reflected the stronger fiscal position of the US government, as the economic recovery and the higher inflation boosted the tax revenues and reduced the spending needs.

The bond market welcomed the news, as it meant that the supply of new debt would be lower than anticipated, easing the pressure on the bond prices and the yields. The yield on the 10-year Treasury note, which moves inversely to the price, fell to 1.76%, the lowest level since December 8. The bond rally also supported the view that the Federal Reserve would tighten its monetary policy more aggressively in 2024, as it tries to contain the inflation and support the growth.

Leave a Reply

Your email address will not be published. Required fields are marked *