UK bank rate since 1694

There are many different interest rates in the UK but one of the most important is the official bank rate (sometimes also referred to as the Bank of England base rate). This is the rate at which the Bank of England lends to banks. It has a direct influence on interest rates in the domestic banking system and as such the bank rate is a reference level for the rates which the London clearing banks pay on deposits and charge on loans.

Changes to the bank rate are recommended by the Monetary Policy Committee (MPC), which meets once a month to consider changes to the bank rate (more info on the MPC).

Further information on the official bank rate can be found here at the BoE web site.

Over the years this interest rate has been referred to variously as the Bank Rate, Minimum Lending Rate, Minimum Band 1 Dealing Rate, Repo Rate and, today, the Official Bank Rate. But we can regard them all as essentially the same thing. And we can concatenate these rates over the years to create a continuous record of base rates from 1694.

For reference the rates for different periods are shown in the following table.

Period Rate used
1694 – 1972 Bank Rate
1972 – 1981 Minimum Lending Rate
1981 – 1986 Minimum Band 1 Dealing Rate
1997 – 2005 Repo Rate
2006 - Official Bank Rate

The following chart plots this continuous times series of base rate levels from 1694. [NB. The X-axis is not a uniform scale.]

BoE bank rate [1694-2016]

The following table gives some statistics by century on this bank rate data from 1694.

1700s 1800s 1900s 2000s All
Count 2 408 383 31 828
Mean 4.5 4.3 8.0 4.3 6.0
Standard Deviation 0.7 1.6 3.6 1.4 3.3
Median 4.5 4.0 7.5 4.8 5.0
Maximum 5.0 10.0 17.0 6.0 17.0
Minimum 4.0 2.0 2.0 0.5 0.5

The Count row gives the number of times the bank rate was changed in each respective century.

Until 1973 the average bank rate had been around 4%, but then shot up to levels not seen before – reaching a maximum of 17% in 1980.

Volatility (measured by standard deviation) of the bank rate also increased at the same time to levels not seen before.

The bank rate we have today, 0.5%, can be clearly seen to be unprecedented. Previously, the lowest rates seen had been 2% in the 18th and 19th centuries.

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FT30 Index 1935 – Where are they now?

The FT30 Index was started by the Financial Times on 1 July 1935. Today the most widely followed index is the FTSE 100, but for many years the FT30 (originally called the FT Ordinaries) was the measure everyone knew.

The table below lists the original companies in the FT30 Index in 1935 – a time when brokers wore bowler hats and share certificates were printed on something called paper. It’s interesting to see what became of the stalwarts of UK plc from over 60 years ago.

Company Notes
Associated Portland Cement The name was changed to Blue Circle Industries in 1978, and then left the index in 2001 when it was bought by Lafarge.
Austin Motor Left the index in 1947. In 1952 Austin merged with rival Morris Motors Limited to form The British Motor Corporation Limited (BMC). In 1966 BMC bought Jaguar and two years later merged with Leyland Motors Limited to form British Leyland Motor Corporation. In 1973 British Leyland produced the Austin-badged Allegro… [the story is too painful to continue].
Bass Left the index in 1947. In 1967 merged with Charrington United Breweries to form Bass Charrington, In 2000 its brewing operations were sold to Interbrew (which was then instructed by the Competition Commission to dispose parts to Coors), while the hotel and pub holdings were renamed Six Continents. In 2003 Six Continents was split into a pubs business (Mitchells & Butlers) and a hotels and soft drinks business (InterContinental Hotels Group).
Bolsover Colliery Left the index in 1947. The mines were acquired by the National Coal Board on nationalisation in 1947. Bolsover Colliery closed in 1993.
Callenders Cables & Construction Left the index in 1947. Merged with British Insulated Cables in 1945 to form British Insulated Callender’s Cables, which was renamed BICC Ltd in 1975. In 2000, having sold its cable operations, it renamed its construction business Balfour Beatty.
Coats (J & P) Left the index in 1959. Traded as Coats Patons Ltd after the takeover of Patons & Baldwins, then as Coats Viyella, finally as Coats plc. Finally taken over by Guinness Peat Group in 2004.
Courtaulds Demerged its chemical and textile interests in the 1980s, with the former eventually being bought by Akzo Nobel and the latter by Sara Lee. Left the index in 1998.
Distillers Purchased by Guinness in the infamous bid battle of 1986 when it left the index.
Dorman Long Left the index in 1947. Joined British Steel following nationalisation in 1967.
Dunlop Rubber Left the index in 1983, and was then in 1985 bought by BTR (which became Invensys).
Electrical & Musical Industries In 1971 changed its name to EMI and later that year merged with THORN Electrical Industries to form Thorn EMI but then de-merged in 1996. In 2007 EMI Group plc was taken over by Terra Firma Capital Partners but following financial difficulties ownership passed to Citigroup in 2011.
Fine Spinners and Doublers Fell out of the index in 1938, and was later bought by Courtaulds in 1963.
General Electric General Electric was re-named Marconi in 1999, suffered disastrous losses in the dot-com crash and was bought by Ericsson in 2006.
Guest Keen & Nettlefolds Guest Keen is better known as GKN, and is still in the FT30 today.
Harrods Left the index in 1959 when it was bought by House of Fraser, and then later by Mohamed Al Fayed.
Hawker Siddeley Left the index in 1991, and was then bought in 1992 by BTR (which became Invensys).
Imperial Chemical Industries Spun out Zeneca in 1993, and the rump (called ICI) was sold to Akzo Nobel in 2007
Imperial Tobacco Still going strong.
International Tea Co Stores Fell out of the index in 1947, was acquired by BAT Industries in 1972 and ended up as Somerfield in 1994.
London Brick Replaced in the index by Hanson which bought it in 1984.
Murex Left the index in 1967 due to “poor share performance”. Acquired by BOC Group in 1967.
Patons & Baldwins Left the index in 1960 when bought by J&P Coats.
Pinchin Johnson & Associates Left the index in 1960 when bought by Courtaulds.
Rolls-Royce In 1971 RR was taken into state ownership, the motor car business was floated separately in 1973, and RR returned to the private sector in 1987.
Tate & Lyle Still going strong, although its sugar refining and golden syrup business was sold to American Sugar Refining in 2010.
Turner & Newall Left the index in 1982. The company was heavily involved with asbestos production, so it is not surprising that things ended badly. In 1998 the business was acquired by Federal-Mogul, which soon after filed for Chapter 11 protection as a result of asbestos claims.
United Steel Left the index in 1951. The iron and steel works on nationalisation became part of British Steel Corporation (and now part of Tata Steel); while the mining interests passed to the National Coal Board (now closed).
Vickers Left the index in 1986. Bought by Rolls-Royce in 1999.
Watney Combe & Reid Left the index in 1972 when it was bought by Grand Metropolitan, which itself became part of Diageo.
Woolworth (FW) Left the index in 1971. Bought by the forerunner of Kingfisher in 1982, and then de-merged and re-listed in 2001. But the remaining Woolworth’s stores all closed by January 2009.

Of the 30 companies only four exist today as listed companies: GKN, Imperial Tobacco, Rolls-Royce and Tate & Lyle. All of which today are in the FTSE 100 Index, except Tate & Lyle which bounces in and out of the index quite frequently, and is currently out.

Only GKN and Tate & Lyle are in today’s FT30 Index.

The star performer from the original line-up has been Imperial Tobacco.

It’s interesting to note the complete lack of representation in the 1935 FT30 of banks, telecom, oil or drug companies - the four sectors that dominate the UK market today.


 Extract taken from the newly published UK Stock Market Almanac 2016.

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Will 2015 be the first 5th year of decade to end down since 1945?

Since 1875 the UK market has seen negative annual returns only twice in the fifth year of the decade. As can be seen in the accompanying chart, since 1875 the down years were 1915 and 1945 (and 1945 was down only 0.6%).

Annual returns for 5th year of decade [1801-2015]

As of the close 24th December the FTSE All-Share index was at 3449.5, (2.4% below its 2014 close of 3532.7).

The market has three days to climb above 3532.7 and end the year in positive territory.

Update

The answer to the heading is: yes. The FTSE All-Share index ended 2015 at 3447.46: down 2.41% on the year.

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Monthly seasonality of oil

This article looks at the monthly seasonality in the price of crude oil (West Texas Intermediate, WTI).

From 1986

The following chart shows the average price change by month of WTI for the period 1986-2014. For example, since 1986 the price of WTI has increased on average 0.5% in January. 

Crude Oil (WTI) Monthly return average [1986-2014]

From the chart it can be seen that, historically, March, April and August have been strong months for WTI, while October and November have been weak.

Further, we can divide the year roughly into two parts:

  1. March-September when WTI is strong, and
  2. October- February when the WTI price has relatively been weak

The following chart plots the proportion of monthly returns that were positive over the same period. For example, since 1986 48% of the WTI price changes in January were positive.

Crude Oil (WTI) Monthly return positive [1986-2014]

The pattern here largely repeats that seen for the average returns: the strong months are March, April (with July also being strong), and the weak months are October and November.

From 2000

To assess the persistency of the behaviour, the following chart plots the average price change by month of WTI for the period 2000-2014 (i.e. this is similar to the first chart above, but the starting point is 2000 instead of 1986). . 

Crude Oil (WTI) Monthly return average [2000-2014]

Roughly, the two-part nature of the year can still be seen in the monthly performance: the WTI price is relatively strong March-August, but the now weak part of the year starts in September, through to December.

The big change in recent years can be seen in the strength of the WTI price in February: since year 2000 WTI has an average price change of +5.4%.

For completeness, the following chart plots the proportion of monthly returns that were positive over the same period.

Crude Oil (WTI) Monthly return positive [2000-2014]


 

Further articles on oil.

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Oil and the stock market

1. Oil price

The following chart plots the US dollar price of oil from 1971 to today.

West Texas Intermediate ($) [1971 - Nov 2014]The following chart plots the same data but on a log scale.

West Texas Intermediate ($) [1971 - Nov 2014] log scaleOn this second chart the proportionate fall in the oil price recently can be seen more clearly.

2. Oil price $ v £

The following chart plots the US dollar price of the oil against the price in sterling; both data series have been re-based to start at 100.

West Texas Intermediate ($ v £) [1971 - Nov 2014] - rebased to 100Since 1971 the oil price has risen 1,758% in US dollars, and 2,771% in sterling.

3. The stock market priced in oil barrels

The following chart plots the FTSE All Share Index priced in oil barrels (i.e. FTSE All Share Index divided by the oil price in sterling).

FTSE All Share-West Texas Intermediate (£) [1971 - Nov 2014]The current level of the of the ratio is 85.0, which is pretty close to the average of 88.3 for the period since 1971.


UK Stock Market Almanac cover [160 x 240]

The most recent edition of the UK Stock Market Almanac has just been published.

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Monthly seasonality of gold

On 17 March 1968 the system that fixed the price of gold at USD35.00 collapsed and the gold price was allowed to fluctuate. The following chart shows the dollar price of gold since that time.

Gold ($) [1968-2014]Monthly seasonality

The following chart shows the average returns by month of gold($) for the period 1968-2014.

Gold ($) month returns average [1968-2014]And the chart below has similar parameters but it shows the proportion of monthly returns that were positive for each month.

Gold ($) month returns positive [1968-2014]Observations:

  1. Gold($) has been strong in the months of February, September and November
  2. Gold($) has been weak in the months of March and October.

Since 1968 the month with the highest volatility has been January, while the lowest has been April.

 

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