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MNI Gilt Week Ahead - June 7 2021: April GDP and Reopening Qs

Headlines surrounding whether the June 21 reopening will go ahead as planned and Friday's April GDP monthly data will be the highlights for the UK this week while external events will continue to have a large bearing on UK markets.

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Headlines surrounding whether the June 21 reopening will go ahead as planned and Friday's April GDP monthly data will be the highlights for the UK this week while external events will continue to have a large bearing on UK markets.

  • Saturday's Telegraph reported that over-40s will have their second vaccine dose within eight weeks of the first (in a move that echoes the change for over-50s and is instead of the 11-12 week gap originally planned) with the government considering pushing back the next set of lifting of restrictions to July 5 (instead of June 21) with all over-40s to have been offered a second vaccine by July 5. The week ahead is seen as critical with children returning to school following the half term break and the government hoping that with people having been moving around the country that more cases of the Delta variant do not cause a sharp increase in Covid-19 cases. Cases in the week to 3 June had already increased to just over 30,000 up from the 20,000 the prior week but thankfully there is not a corresponding rise in hospital admissions yet. With over 50% of the adult population having had both doses of the vaccine and 75% having had one dose, the hope is that hospital admissions will not pick up substantially and that most of these new cases will turn out to be relatively mild or asymptomatic. Health Secretary Matt Hancock told the BBC that the government is "absolutely open" to delaying the planned June 21 reopening saying that the Delta variant was making the decision on whether to proceed as planned on June 21 as "more challenging".
  • In terms of data this week, the highlight will be Friday's monthly GDP data for April along with its constituent parts. Recall that in England the first restrictions on social contact were eased on 29 March while 12 April saw non-essential retail and outside hospitality start to reopen. This will be the most conclusive data yet on the impact of the easing of lockdown. A downside surprise to the data is likely to be largely dismissed by markets while an upside surprise would likely have been market moving, had it not been for the current debate over whether the June 21 reopening date would be postponed.
  • There is not a lot else on the calendar for the UK this week with Haldane due to make a couple of appearances but his views are well known and as an outgoing MPC member who has already dissented at the last meeting his views are not seen as anything like the consensus of the MPC. There is also an update on the regulatory priorities regarding the LIBOR transmission from Hughes.
  • Note that the 8.00% Jun-21 gilt matures on 7 June. Despite having a nominal size of almost GBP25bln, less than GBP5bln is held by markets with the remainder already bought back by the government or owned by the BOE. (And note that despite these holdings from the BOE maturing there will be no change to the pace of QE to reflect the reinvestment).
See the link below for the full document including auction previews for the week ahead, QE tracker and BOE purchase analysis, cash flow matrix and issuance calendar:

GiltWeekAhead07062021.pdf