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A Quick Note On Yesterday’s Gilt Tightening Vs. Bunds

GILTS
HomepageBond Market NewsBulletMarketsFixed Income Bullets

We have received some questions regarding yesterday’s gilt outperformance vs. Bunds.

  • There wasn’t much on the headline side to prompt the outperformance for UK paper.
  • If you look at the scale of the moves in the respective short ends our best guess is that relative betas to U.S. monetary policy pricing drove things post-Fed.
  • UK markets continue to show high sensitivity to all things U.S.
  • Meanwhile, EUR markets are more insensitive given the ECB’s guidance towards a June cut, which has helped anchor monetary policy pricing through year end (along with source reports re: the likely magnitude of ’24 cuts), despite the lack of ECB commitment to a probable policy path post-June.
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We have received some questions regarding yesterday’s gilt outperformance vs. Bunds.

  • There wasn’t much on the headline side to prompt the outperformance for UK paper.
  • If you look at the scale of the moves in the respective short ends our best guess is that relative betas to U.S. monetary policy pricing drove things post-Fed.
  • UK markets continue to show high sensitivity to all things U.S.
  • Meanwhile, EUR markets are more insensitive given the ECB’s guidance towards a June cut, which has helped anchor monetary policy pricing through year end (along with source reports re: the likely magnitude of ’24 cuts), despite the lack of ECB commitment to a probable policy path post-June.