Gamblers raise bets on rate rises

FINANCIAL gamblers are raising their bets on unwelcome news about interest rates for homeowners on both sides of the Atlantic next month.

With surging oil prices threatening to rekindle inflation, financial bookmakers are pricing in a near-certain rate increase in the US and are almost equally divided on the prospects of the second quarter-point rise in two months in Britain.

Prices quoted by spread betting firms and betting exchanges were suggesting that there is about an 85% chance of a rise in American interest rates and a 40%-50% likelihood of an increase in British rates in June.

David Buik at spread bookmaker Cantor Index said his firm is quoting 435-439 (4.35% to 4.39%) for interest rates in Britain at the end of the next meeting of the Bank of England's monetary policy committee, under Governor Mervyn King, on 10 June.

Since British rates are at 4.25%, this suggests there is almost a 50% chance of an increase to 4.5%.

On the London-based Betfair exchange, £15,000 of wagers on the June MPC decision had been matched by yesterday, with a quarter-point rise quoted at the equivalent of 5/4 against and a no-change decision at 2/3 on. However, a rise in US rates from 1%, where they have been for almost a year, looks a near-certainty.

Cantor was quoting a spread of 120-123 (1.2% to 1.23%) for the US Fed funds rate after the next Federal Open Market Committee meeting on 29 and 30 June, implying a near-90% chance of a an American rate rise.

Dublin-based Tradesports was quoting an 80%-85% chance of a quarter-point rise in US rates while Betfair was showing a quarter-point rise as 1/3 on.

Meanwhile, a survey from HSBC revealed that this month's quarter-point increase in UK rates has had no impact on consumers' appetite for debt. The bank's household sector borrowing confidence index registered 178 in May against 170 in April. Strengthening demand for mortgages contrasted with a slight weakening in demand for unsecured debt.

World oil prices were rising again today ahead of key data on US crude stocks, which traders will scrutinise for clues as to whether there will be enough to meet peak holiday- season demand for petrol. US light crude futures were up nine cents at $41.17 a barrel. On Monday, they closed at a record $41.72. In London today, Brent crude rose three cents to $37.47.