MNI Gilt Week Ahead - Feb 22 2021: Roadmap to Normality

• The biggest event for the UK this week will undoubtably be the government's announcement regarding the roadmap out of lockdown. Cabinet are expected to sign off the decisions this morning with the Prime Minister expected to give a statement to parliament at 15:30GMT (timing approximate) before a press conference is given to the nation at 19:00GMT. According to media reports, this is likely to be accompanied by a "60-page document" emphasising "data not dates". However, it is looking likely that all school children will return on 8 March. The Telegraph is reporting that from 29 March people will be able to meet outside again if they stick to either a two household rule (with no limits on the size of a household) or the "rule of six" for people from multiple households. This is also seen as the date people will be allowed to leave their local area. According to multiple media reports, pubs and restaurants will be allowed to open for outside service in the next stage (likely April) with non-essential retailers also opening. Then the next steps would be to allow indoor pub/restaurant service and hairdressers to open before staycations are allowed.
• There is little in the way of economic data this week outside labour market data released tomorrow. However, there will be increased focus on MPC comments with Bailey, Broadbent, Haskel and Vlieghe all testifying before the Treasury Select committee on Wednesday afternoon. This will be accompanied by the Annual Reports of both Broadbent and Haskel. Any views on the exit strategy for monetary policy (QE or rates first) are likely to be closely watched. Haldane will make an appearance earlier in the day in conversation with Professor Sir Cary Cooper while Ramsden will speak on Friday.
• There is only one auction scheduled for the week ahead. So far this fiscal year the only week that has only seen one supply event was the week commencing 4 January, the first week back for many traders after the Christmas holidays. We assume that supply had been kept light in this week to give the DMO the flexibility to either hold an extra syndication or a tender. The DMO has already confirmed that it has completed its syndication programme for the fiscal year. And, although we would not completely rule out a tender operation, the MNI Markets team thinks that the OBR's commentary on the state of the public finances on Friday has lowered the probability of a tender operation this week.
• The OBR stated on Friday that year-to-date public sector net borrowing (PSNB) ex-write offs was GBP39.8bln lower than expected in its November forecast. Some of this is due to less deferrals of self-assessment tax in January than expected (and to a lesser extent greater VAT cash receipts) which pulls some of the expected receipts from fiscal 2021/22 into this fiscal year. The other caveat is that the OBR's commentary generally refers to accrual-based accounting rather than giving a direct indication of the state of cash requirements versus its November forecast. However, it seems very likely that the government's cash position is better than expected, which the MNI Markets team thinks lowers the probability of a tender operation this week.

GiltWeekAhead22022021.pdf