MNI Gilt Week Ahead

• The focus of markets is likely to be on Brexit negotiations again with the European Council Summit due to kick off on Thursday and Brexit progress due to be discussed. The weekend press has focused on a frosty call between Johnson and Macron as well as a call between Merkel and Johnson with some media starting to report splits in the EU side with France said to be continuing to take a hard line on fisheries.
• After last week's disappointing economic data with GDP and all of its major components disappointing expectations for growth in August, this week will see labour market data in focus. We will receive updated HMRC data for September but the headline series are still lagging back to August – either way they are both some way off picking up the effects of the end of the furlough later this month before the transition to the much less generous Job Support Scheme.
• We note that the Bank of England has released the questionaire for firms to fill out regarding their readiness for negative rates. Questions include to what extent can systems handle zero or negative rates currently, what level of decimal places systems can handle, whether systems could handle a tiered system and what costs/time scales getting systems ready would incur. In a letter from Sam Woods, Deputy Governor of the PRA, to CEOs, he writes that " The Bank and PRA will consider the wider business implications, including on financial stability, safety and soundness of authorised firms and pass-through to the wider economy. This letter, however, is seeking information to understand firms' operational readiness and challenges with potential implementation, particularly in terms of technology capabilities."
• The press release also states that "This structured engagement is not indicative that the MPC will employ a zero or negative policy rate." There are a number of BOE appearances this week where negative rates questions and the slowing recovery potentially could come up in the questioning. Ramsden, Haskel and Bailey are all due to appear today with Bailey testifying ahead of the Lords Economic Affairs Committee tomorrow, Haldane speaking on Wednesday and Cunliffe speaking on Thursday.

GiltWeekAhead12102020.pdf