Aberdeen: Commentary on bond-sell off
Matthew Amis, Investment Director – Rates Management at Aberdeen Investments, comments on the developments in the British gilt market.
'Gilts played catch-up with European peers yesterday after Monday’s bank holiday. The summer holidays are over and yet the Iranian conflict is still no closer to a resolution. Tensions in the Middle East increased again last night, as such both oil and natural gas moved higher. UK 10 Year gilt yields are up over 10bps this week.
At the front end of the UK curve, markets are now pricing in three hikes from the Bank of England over the next year. Gilt yields look elevated here but until oil and gas start freely moving in the Straits of Hormuz, gilt yields are going to struggle.
On the politics front, PM Burnham delivered his maiden speech to parliament yesterday. From a gilt market perspective I don’t think we learnt anything new. But what is clear is with gilt yields at these levels the fiscal room for manoeuvre going into October’s Budget is incredibly limited.'
