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6 Aug 2015
UK gilt yields weaken as rate hike bets drop
FXStreet (Mumbai) - The UK gilt yields suffered losses as rate hike bets declined after BOE minutes were slightly less hawkish than expected by the markets.
Short duration yields drop sharply
The 2-year yield, which mimics rate hike expectations, fell to a low of 0.604, before recovering slightly to 0.62; down 3.3 basis points on the day. Similar losses are seen in the 1-year and 3-year yield. The losses indicate the rate hike bets took a hit after the BOE minutes> showed only one member in favor of a rate rise as opposed to two to three votes in favor of a rate rise.
Meanwhile, the inflation forecasts for 2015 was halved to 0.3% from 0.6%, which pretty much erased rate hike expectations at the turn of the year. The bank also sounded cautious about the Sterling strength and its disinflationary effect. Moreover, the dovish noise overshadowed the upward revision of the growth forecasts.
At the long-end of the curve, the 10-year yield fell to a low of 1.92%, before recovering slightly to 1.95%; down 2.7 basis points on the day. The focus now shifts to the quarterly inflation report and Carney’s press conference, which are likely to offer more insights into bank’s take on inflation, growth and rate hike.
Short duration yields drop sharply
The 2-year yield, which mimics rate hike expectations, fell to a low of 0.604, before recovering slightly to 0.62; down 3.3 basis points on the day. Similar losses are seen in the 1-year and 3-year yield. The losses indicate the rate hike bets took a hit after the BOE minutes> showed only one member in favor of a rate rise as opposed to two to three votes in favor of a rate rise.
Meanwhile, the inflation forecasts for 2015 was halved to 0.3% from 0.6%, which pretty much erased rate hike expectations at the turn of the year. The bank also sounded cautious about the Sterling strength and its disinflationary effect. Moreover, the dovish noise overshadowed the upward revision of the growth forecasts.
At the long-end of the curve, the 10-year yield fell to a low of 1.92%, before recovering slightly to 1.95%; down 2.7 basis points on the day. The focus now shifts to the quarterly inflation report and Carney’s press conference, which are likely to offer more insights into bank’s take on inflation, growth and rate hike.