Market report
CUSTOS
The gilt-edged market has been in complete dis- array this week. Selling has been substantial and prices have plunged to record depths.
In chronological order, what has happened is as follows. About three weeks ago the optimists in the market, those who thought a cut in Bank rate was still possible this year, lost heart and began to sell. This wave was reinforced by foreign selling on the latest trade figures. Then there was a very curious muddle in the market. It looked as though the Government broker was trying to take the discount houses out of the short-end by offering them reasonably decent exit prices. This was widely interpreted as a sign that something very nasty was about to happen to the market as a whole, the most obvious interpretation being special deposits from the clearing banks. This would have meant heavy selling of gilt-edged securities by the banks and so depressed prices very sharply in- deed. In fact at the time of writing there have been no further credit restrictions. Did the authorities change their minds about special deposits?
On top of all this there has been the cur- rency crisis, which has embroiled the pound but which is essentially a massive flight out of overvalued francs into undervalued marks.
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