Halister News

(Bloomberg) -- Long-dated gilts offer “better value” than the front end as BOE may announce a credit easing program at the start of 2017, Myles Bradshaw, global head of aggregate fixed income who manages $7b of assets at Amundi, says in interview.

• London-based Bradshaw has a small underweight position on sterling, expecting further downside pressure on the currency from here given expectations of more easing, lack of clarity on Brexit negotiations
• Appointment of May as PM is positive as she is the more experienced candidate and has been chosen faster than expected
• Investors will want May to lay out her key Brexit- negotiation objectives but it will probably be difficult for her to do this quickly, particularly as she is a consensus candidate rather than an electoral winner
• BOE will cut rates by a total 50 bps, probably in two stages, at July and August meetings; chances of BOE rates to go negative are low as experiences in Europe, Japan have shown it may have unintended consequences
• Doesn’t expect ECB to react to any Brexit fallout for now as the event’s epicenter remains U.K.; European central bank is likely to play a “waiting game”
• Moving away from capital key will probably happen in future but ECB has to prepare the ground for this as it would be a politically controversial decision; it may opt later this year for some technical tweaks to QE
• Peripheral bonds remain more attractive than bunds; political risks in Italy heading into the Constitutional referendum in October may spur volatility
• Favors U.S. credit market as the economy is growing and Fed won’t probably hike interest rates anytime soon
• NOTE: BOE to meet this week; strategists recommend selling the pound into the meeting