Investment planning: Quarterly Stamp Duty Land Tax statistics - Q2 2021 and more

 Contents:

• Bond yields: back to February
• Consultation on the Government's plan to enact 'travel rule' for cryptoassets
• Quarterly Stamp Duty Land Tax statistics - Q2 2021
• Help to Buy ISAs - quarterly statistics released

 

Bond yields: back to February

(AF4, FA7, LP2, RO2)

Global bond yields have seen quietly falling from their spring highs.

At the end of 2020, the yield on 10-year UK gilts (the orange line on the chart) was 0.196%. It then rose to the dizzy heights of 0.823% by the end of February and plateaued around that level until mid-May, when it reached its current high for the year at 0.899%. Since then, the yield has been gradually falling so that it is now around 0.52%, a level last seen just under six months ago.

Look to the USA (blue line) and Eurozone (represented by a grey line for Germany) and the story is much the same: in early August 10-year bond yields are back at the levels of mid-February.

At first sight the performance is puzzling, because since the start of the year inflation has sharply increased:

• In the UK, the CPI has gone from 0.7% to 2.5%.
• In the USA, the CPI has leapt from 1.4% to 5.4% in June. The Federal Reserve’s favoured benchmark, the Core Personal Consumption Expenditure, has been more muted, but still rose from 1.5% to 3.5%.
• In Germany, the corresponding rise is from 1.0% to 2.3% (and a preliminary estimate of 3.8% for July). The Eurozone has seen a change from 0.9% to 1.9% (2.2% preliminary estimate for July).

Rising inflation and falling bond yields are not a combination that Economics 101 says should happen. Inflation reduces the value of future payments of interest and capital, which, in theory, ought to mean investors demand higher returns in compensation. There are several potential reasons why that is not happening:

• The central banks of the UK, USA and Eurozone are still running their pandemic response quantitative easing (QE) programmes. Consequently, in each of those markets the central bank is a price-insensitive mega-buyer soaking up supply from heavy borrowing governments.
• The bond markets have chosen to accept the central banks’ mantra that the spike in inflation is ‘transitory’ and will unwind rapidly as supply chains normalize and other pandemic distortions fade.
• There are bond buyers, like pension funds, that have no choice but to buy bonds to match their liabilities.
• Fixed interest investors are less convinced than their equity investor counterparts that the vaccine-induced economic bounce will continue. Bond buyers may already be viewing peak recovery and a return to the low growth pre-2020 conditions or even a recession.

One side effect of the fall in bond yields is that once again the stock of negative yielding debt is rising rapidly. The Barclays negative yielding bond index now puts the total value at $16.5tn.

 

Consultation on the Government's plan to enact 'travel rule' for cryptoassets

(AF4, FA7, LP2, RO2)

The Government has released a public consultation on its plans to implement the Financial Action Task Force (FATF) “travel rule” for cryptoassets. 

The Treasury announced that the consultation is a critical step in amending UK legislation on terrorism financing, money laundering, and cash transfers.

Identifying the parties to a virtual-currency transfer corresponds to FATF's so-called “travel rule,” which has applied to ordinary wire transfers for several years and is already part of UK law under the Funds Transfer Regulation (FTR). 

As a result of this, cryptoasset firms will need to put in place systems for ensuring that personal information of the originator and beneficiary of a cryptoasset transfer is transmitted and received alongside the transfer, in an appropriate format.

The document includes several proposals from the FATF's proposals, among them the suggestion that beneficiaries should be prevented from withdrawing amounts above £1,000 if required information is missing.

Other amendments proposed in the consultation include:

• Formation of limited partnerships will be classed as a business relationship and brought under the regulated services listed for trust or company service providers.
• Persons obliged to carry out customer due-diligence on the beneficial ownership of their clients will be required to report to the authorities on any discrepancies they find.
• Certain types of low-risk payment service providers will be exempted from anti-money laundering (AML) regulation.
• Artists are to be removed from the scope of the definition of art market participants in regulation 14 of the Regulations.
• Controls will be relaxed on the sharing of money-laundering information between supervisory authorities and 'relevant' law enforcement authorities. In particular, the government's Department of Business, Energy and Industrial Strategy (BEIS) may be granted access to the information.

The consultation runs until 14 October 2021 with legislation likely to be introduced in the spring of 2022.

 

Quarterly Stamp Duty Land Tax Statistics 

(AF4, FA7, LP2, RO2)

The latest stamp duty statistics show that the total stamp duty land tax (SDLT) transactions in Q2 2021 (April to June) were 9% higher than in Q1 2021, but 165% higher than in Q2 2020.

The increase in transactions in the last four quarters have been impacted by the introduction of the SDLT holiday which caused a substantial rise in the number of transactions being completed in June 2021.

The figures also show:

• non-residential property transactions in Q2 2021 were 12% higher than in Q1 2021, and 79% higher than in Q2 2020;
• total SDLT receipts in Q2 2021 were 12% higher than in Q1 2021;
• residential property receipts in Q2 2021 was 12% higher than Q1 2021, and 90% higher than Q2 2020;
• non-residential property receipts in Q2 2021 were 11% higher than in Q1 2021, but double (100% higher) that of Q2 2020.

HMRC is only reporting figures up to Q2 2020 for First Time Buyers Relief, because, since the introduction of the residential SDLT holiday, there has been, from 8 July 2020 to 30 June 2021, no requirement for first-time buyers to claim the relief. Even so, up to Q2 2020 there were 540,900 claims that have benefited from that relief, and the total amount relieved by these claims is a staggering £1,293 million over the period.

 

Help to Buy ISAs - quarterly statistics released

(FA5)

HMRC’s latest quarterly statistics on Help to Buy ISAs have been released. These cover the period from 1 December 2015 to 31 March 2021.

The statistics show that since the launch of the Help to Buy ISA, 410,075 property completions have been supported by the scheme and 538,040 bonuses have been paid through the scheme with an average bonus value of £1,073.

The table below shows the number of property completions supported by the scheme broken down by property value:

 

The figures also show:

• The mean value of a property purchased through the scheme is £175,010 compared to an average first-time buyer house price of £214,452 and a national average house price of £256,405.
• The median age of a first-time buyer in the scheme is 28 compared to a national first-time buyer median age of 30.

Note even though the scheme closed to new accounts on 30 November 2019, account holders can continue saving into their account until 30 November 2029. 

 

 

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