Hard to See a Ceiling for Gilt Yields

UK gilt yields face a 'no-ceiling' scenario driven by political turmoil and the BoE's £70bn annual QT. Simultaneously, US Treasury yields are climbing due to 3.8% inflation and the continued closure of a vital strait.

Key Takeaways

• 1.Gilt yields are under upward pressure from both UK political leadership uncertainty and the Bank of England's ongoing £70bn/year quantitative tightening.
• 2.US Treasury yields are rising following higher-than-expected April CPI (3.8%), with the 10yr yield targeting 4.5% amidst persistent geopolitical supply chain disruptions.
• 3.European bond supply remains heavy with multi-billion euro auctions scheduled for Ireland, Italy, Portugal, and Germany.

Table of Contents

• Rates Spark: Hard to see a ceiling for gilt yields
• Politics are adding to the long list of bearish gilt forces
• US inflation added to the pain for Treasuries
• Wednesday's events and market views

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