HALISTER1: Continue to Favor Short-Dated U.K. Real Yields Post-Brexit: HSBC

Continue to Favor Short-Dated U.K. Real Yields Post-Brexit: HSBC

(Bloomberg) -- Favor short-dated U.K. real yields due to rising inflation prospects and market expectation of BOE easing in the coming months, HSBC strategist Theologis Chapsalis writes in client note.
  • Long-dated U.K. linkers have experienced a sharp rebound in the beta measure and recommend taking partial profits on long positions as we approach IL65 syndication in the second half of July
  • Favor long 5Y in U.K. inflation vs euro zone and U.S.
    • While the Brexit vote may temporarily cause higher U.K. inflation, it weighs on both euro zone growth and inflation, hence expect GBP-EUR inflation spreads (both in breaevens and inflation-linked swaps) to widen
    • Investors who share that view and see downside risk to commodity prices should consider switching into the U.K. from the U.S. as the latter market has a higher sensitivity to commodities
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Theologis Chapsalis (HSBC Bank PLC)

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