MNI Gilt Week Ahead - Mar 15 2021: Will the BoE react to FI?

• The highlight of the week ahead will be the Bank of England MPC meeting on Thursday. Based on the previews that we have read so far, unanimous votes are expected for both the total target stock of QE and the rate decision. However, there is disagreement about how the MPC will respond to the fixed income sell-off. There has been very little commentary from MPC members about the sell-off (in contrast to other central banks). Financial conditions have undeniably tightened, but the Budget was more expansionary than expected, and how the MPC judges the balance between the two will determine the market reaction to the meeting. Some analysts expect the MPC could warn that the tightening of financial conditions has been "unwarranted", potentially setting up an announcement of an increase in the target stock of QE in May or the summer. Others think that the MPC will point to the better economic outlook, extra stimulus from the Budget and progress being made on the vaccination front and not sound too concerned about the increase in yields. This could potentially see an announcement that the pace of purchases could be reduced (in contrast to the pickup in purchase pace announced by the ECB last week).
• Other than the MPC meeting, there is little scheduled on the domestic front with GfK consumer confidence data and public finance data both due Friday.
• Note that there is heavy supply this week with the 3-year and 15-year benchmarks being sold and the 1.625% Oct-54 but next week and the week after will see issuance slow into the end of the fiscal year.

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:

GiltWeekAhead15032021.pdf

• In addition, in case you missed it, we detailed the issuance outlook for the April to June period in our publication here.