MNI Gilt Week Ahead - June 1 2021: Third Wave Making Headlines

• Despite final PMI data being released this week and a slew of second tier data, the gilt market is more likely to be driven by external events (such as the US employment report on Friday) and any decisive comments on whether the June 21 end of Covid-19 restrictions is carried out in full or not.
• The front pages of UK newspapers this morning see a number of reports covering the comments from Professor Ravi Gupta that the UK could be experiencing the beginning of a third wave of Covid-19. Professor Gupta is a member of Nervtag and said that the government should consider delaying the last step on the English Covid-19 roadmap by "a few weeks." This would enable more people to receive a second vaccine dose, something seen as particularly important as data suggests that two doses are needed for both the AZ/Oxford and Pfizer vaccines to be effective against the Delta (India) variant.
• News over the past few days has suggested that the government is targeting giving a second vaccine dose to all over 50-year-olds by the June 21 date. But the data conducted on the efficacy of the vaccine for the Delta variant has been conducted on people who had received the second dose of the vaccine three weeks prior. With just under three weeks to go until June 21, just under 50% of the adult population has received a second dose.
• One option that could be considered by the government rather than delaying the June 21 date completed is to break the step into two stages. Some reports over the weekend suggested that social distancing measures could remain in place alongside the recommendation that people work from home if they are able to. And while some businesses such as nightclubs would remain closed, most other businesses would be able to fully open or at least be open with less restrictions than at present.
• Bailey is the only MPC member scheduled to make a public appearance this week, speaking today and Thursday on climate change and finance. It is also worth noting that the BOE's Ramsden was interviewed in the Guardian this morning. The key quote from his interview: "There is a risk that demand gets ahead of supply and that will lead to a more generalised pick-up in inflationary pressure. That's something we are absolutely going to guard against. We are looking carefully at the housing market and a raft of real-term indicators… If it is not temporary we know what to do about that. We can push bank rate up from its historically low level [0.1%] and we know what that will do to demand."
• In terms of data this week, the highlights will be the final print of PMIs but we will also see the BRC shop price index, BOE money supply data and the Decision Maker Panel data.

GiltWeekAhead01062021.pdf