MNI Gilt Week Ahead - Mar 29 2021: End of the fiscal year

• The last few weeks have seen tensions between the UK and the EU simmer but last week has seen some key steps towards the resolution of some key areas. First, the EU has decided not to explicitly ban vaccine exports, and so it appears as though the UK's supply of Pfizer vaccines will be uninterrupted (which given the UK has not been stockpiling vaccinations will be crucial for keeping up with second doses). However, it does appear as though the UK will not be receiving as many extra doses of the Oxford-AZ vaccine from the Netherlands as it had been expecting (note that the UK has only received 1 million Oxford-AZ imports from the EU). It is unlikely there will be many first doses of the vaccines in the month of April with second doses prioritised instead, but the government's aim of offering every adult in the UK a first dose of a vaccination by the end of July continues to remain on track.
• Also last week, the UK and EU signed a memorandum of understanding (MoU) on the future of financial services regulation with talks on equivalence due to begin. There is very little in the way of details at this stage and a MoU had been expected by the end of March so this is largely expected, but at least removes a potential downside risk. EU-UK relations will remain in focus this week with the BBC reporting that the UK will send an "agreed work programme" on implementing the Northern Ireland protocol while the weekend press also speculates over which European countries will be added to the "red list" with France seen as a prime candidate.
• The main highlights on the calendar this week are second readings of both Q4 GDP and March PMI data (on Wednesday and Thursday respectively). In a holiday shortened week, there are no scheduled speeches from MPC members.
• There are no scheduled auctions or syndications for the upcoming week (other than the T-bill auction which will take place on Thursday this week given the holiday on Friday). We note that the DMO kicked off funding for the 2020/21 fiscal year by holding a tender operation on 1 April. We would not completely rule this out but given the holiday, we think that it is more likely that the DMO will hold off until next week's scheduled operation. It is also worth mentioning that the Sukuk that was sold via syndication last week will not settle until 1 April, so will technically count as the first operation of the 2021/22 fiscal year.

GiltWeekAhead29032021.pdf