HALISTER1: Look to ‘Fade’ Friday’s Late Declines in U.K. Linkers, RBS Says

Look to ‘Fade’ Friday’s Late Declines in U.K. Linkers, RBS Says

(Bloomberg) -- Following FT report that U.K. will look at allowing pension funds to suspend inflation-linked rises for retirees, GBP linker market has opened to the idea that defined-benefit regulation may weaken structural demand for inflation, RBS strategists including Giles Gale write in client note.
  • 30y breakevens fell sharply following the report, while long-dated real yields rose ~15bps in an hour
  • See this theme “as a fade”; U.K. linker market previously had similar fears in the past, each time the government has backed off
  • Even if parliamentary committee permits schemes to reduce inflation exposure to avoid falling into Pension Protection Fund, that would only be allowed under strict circumstance
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Giles Gale (Royal Bank of Scotland Group PLC)

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