Monetary Policy & Inflation | Rates | UK
2s30s Gilts Steepening
- By Henry Occleston
- 4 min read
DM Rates Summary
- The BoE took a dovish lean at today’s meeting, raising its bank rate 25bps but with one vote for no-change and a statement that toned down the likelihood of future hikes.
- While this dovish tilt came sooner than we had anticipated, it aligns with our view that the BoE will underdeliver hikes versus market pricing.
- APF active sales are likely to begin in May alongside the release of new economic forecasts. The MPC will want to strike a more cautious tone ahead.
- The UK Treasury will likely deliver slightly more spending at next week’s Spring statement. The net supply picture suggests relative weakness in the 7-10Y and +15Y spaces.
- This, alongside falling defined benefit scheme liabilities, will allow steepening into the long-end.
- We see 2s30s steepeners as an efficient way to play these dynamics.
DM Rates Summary
- The BoE took a dovish lean at today’s meeting, raising its bank rate 25bps but with one vote for no-change and a statement that toned down the likelihood of future hikes.
- While this dovish tilt came sooner than we had anticipated, it aligns with our view that the BoE will underdeliver hikes versus market pricing.
- APF active sales are likely to begin in May alongside the release of new economic forecasts. The MPC will want to strike a more cautious tone ahead.
- The UK Treasury will likely deliver slightly more spending at next week’s Spring statement. The net supply picture suggests relative weakness in the 7-10Y and +15Y spaces.
- This, alongside falling defined benefit scheme liabilities, will allow steepening into the long-end.
- We see 2s30s steepeners as an efficient way to play these dynamics.
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