Gilt Week Ahead

It is a busy week for the UK with the MPC due to meet, Brexit negotiations continuing, the Internal Market bill due to continue making headlines and a number of significant data releases all due.

• No immediate policy changes are expected from the MPC on Thursday with QE already in place until the end of the year and little chance of an immediate change to Bank Rate. Focus will be on how the Monetary Policy Statement and Minutes paint the picture for the outlook.
• From a number of MPC speeches recently there seems to be more and more focus on the downside risks to the recovery. Indeed, in both the current political context and with the number of UK Covid-19 cases beginning to creep up again with R above one, downside risks do not seem to be showing any signs of dissipating. Indeed, despite the Bank's forecasts showing a V-shaped recovery, the tone of comments from almost all MPC members outside of Chief Economist Andy Haldane have all focused more on the downside risks.
• Labour market data on Tuesday is likely to show further falls in employment and a rise in unemployment from 3.9% to 4.1% according to the Bloomberg survey. However, as we have previously argued we think it is the aggregate hours number that is worth watching here and that may show some tentative signs of picking up. The data will cover the 3-months to July and with large parts of the economy reopening on 4 July, hours should have seen a boost relative to the April hours which will be dropping out of the data. However, the extent of the rebound is currently unclear.
• Inflation data on Wednesday will be closely watched by the linker market but is unlikely to trigger little in the way of policy changes so may go under the radar elsewhere. Retail sales for August which are due for release on Friday will give us our best indication yet of the state of the consumer recovery.
• Brexit negotiations are still showing no sign of any progress, at least publicly and will continue informally this week. The Internal Markets bill that seeks to override parts of the Withdrawal Agreement will be up for debate Monday to Wednesday in the Commons this week. The political undertone will continue to overshadow markets this week.

See the full document for auction previews, QE tracker and BOE purchase analysis, cash flow matrix and issuance calendar.

https://emedia.marketnews.com/GiltWeekAhead14092020.pdf