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GILTS: /STIR: TD Like 2s10s Flatteners & Received 2y1y GBP Vs. EUR

GILTS
CEEMEABulletUKGlobalFixed Income BulletsRegionMarkets

Late on Tuesday TD Securities wrote “gilts have notably underperformed in the global rates rally. Labour's fiscal gap and the UK's services inflation gap seem to be key driving factors.”

  • Looking forwards, they suggest that “Labour’s pre-election pro-growth agenda is being challenged by its self-imposed manifesto restrictions on taxes and debt rules. At this stage it seems the Budget is more likely to be a short-term fix.”
  • They also wrote “with growth and productivity impulses in the UK tracking more closely with the euro area than the US, we believe it will be hard for markets to continue to price an elevated BoE terminal rate vs. peers.”
  • As a result, they “still believe monetary policy will remain our key anchor. We favour being received 2y1y GBP vs. EUR and 2s10s gilt curve flatteners.”
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Late on Tuesday TD Securities wrote “gilts have notably underperformed in the global rates rally. Labour's fiscal gap and the UK's services inflation gap seem to be key driving factors.”

  • Looking forwards, they suggest that “Labour’s pre-election pro-growth agenda is being challenged by its self-imposed manifesto restrictions on taxes and debt rules. At this stage it seems the Budget is more likely to be a short-term fix.”
  • They also wrote “with growth and productivity impulses in the UK tracking more closely with the euro area than the US, we believe it will be hard for markets to continue to price an elevated BoE terminal rate vs. peers.”
  • As a result, they “still believe monetary policy will remain our key anchor. We favour being received 2y1y GBP vs. EUR and 2s10s gilt curve flatteners.”