MNI Gilt Week Ahead - BoE  Negative Rate Review Key Focus

• This week's MPC meeting will clearly be the highlight of the week for UK markets. Although nothing is really expected in terms of immediate policy changes, the results of the Bank's review into negative interest rates will be published (either as a separate document or as part of the MPR). We will cover this in more detail in our Bank of England preview which we will send on Wednesday morning, but the consensus view is that negative rates will be added to the toolbox but not deployed in the near-term. The MPR will also see the Bank update its economic forecasts with near-term growth expected to be revised down with the current lockdown restrictions more severe than the Bank had assumed back in November. However, the real question will be on how the Bank's medium-term view has evolved. A Brexit deal has been agreed and the vaccination programme is on track (in the UK at least), both positive developments, but how much will the Bank assume has the current lockdown hit longer-term potential output and activity.
• The spat between the EU and UK over vaccine supplies and the knock-on effect on the Northern Irish border seem to be defusing, but Covid-19 data and vaccination progress will continue to be watched closely this week. Also this week, we receive the final PMI prints, M4 money supply and lending to individuals and house price data.
• We note that as we have passed 31 January, the 0.125% Jan-24 gilt will no longer be eligible for APF purchases while the 0.125% Jan-28 gilt will move from the medium bucket to the short bucket. The DMO also announced last week the syndicate for the 0.125% Mar-51 linker which is due to be sold next week (we expect Tuesday). Joint bookrunners will be BofA Securities, Citi, Santander and UBS Investment Bank.

GiltWeekAhead01022021.pdf