A very busy day in UK markets with.....>

GILT SUMMARY: A very busy day in UK markets with the day starting with an

emergency rate cut followed up in the afternoon by the government announcing a

stimulus package to help the economy deal with the coronavirus.

- This morning the BoE cut rates by 50bp to 0.25%, announced an extension to the

Term Funding Scheme for SMEs (TFSME) to provide incentives to banks through

cheap four-year funding. The FPC also announced that the countercyclical capital

buffer would be cut from 1% to zero for at least 12 months (it had been expected

to rise to 2% in December).

- The Budget saw a GBP30bln Covid-19 short-term stimulus package as well as a

large medium-term infrastructure package. The gilt remit is lower than the

market had expected at GBP156.1bln causing gilts to rally. However, we note that

the remit is based on a CGNCR estimate that is based on OBR forecasts that were

made before the stimulus package was in place, so there is a good chance the

remit will be revised higher in the future.

- Gilt futures are down -0.69 today at 137.26 with 10y yields up 3.5bp at 0.273%

and 2y yields down -1.7bp at 0.127%.