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US Election Uncertainty & BoE QE Speculation Underpin Bull Flattening

GILT SUMMARY

Gilts have rallied and the curve has sharply bull flattened. Uncertainty over the outcome of the US election and the possibility of Donald Trump challenging the result in the Supreme Court has been instrumental, with the potential for additional UK QE further supporting gilts.

  • Gilt yields are now 3-7bp lower on the day with the 2s30s spread 4bp narrower. Last yields: 2-year -0.0737%, 5-year -0.072%, 10-year 0.2106%, 30-year 0.7667%.
  • The Dec-20 gilt future trades at 136.21, towards the top end of the day's range (L: 135.78 / H: 136.33).
  • The DMO earlier sold GBP3.0bn of the 0.125% Jan-26 Gilt.
  • Although it looks at the vote counting in the US election will drag on, focus will temporarily shift to the BoE tomorrow. Following on the heels of the ECB's apparent pre-commitment of additional stimulus in December, the BoE is expected to announced a GBP100bn in QE.
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