HALISTER1: UBS Cuts Gilt 10Y Yield Yr-End Forecast to 1.80% on Weak Growth

UBS Cuts Gilt 10Y Yield Yr-End Forecast to 1.80% on Weak Growth

(Bloomberg) -- UBS lowers U.K. 10Y yield forecasts following recent downward revisions to global growth projections and changes to BOE MPC policy outlook, strategist John Wraith writes in a client note.
  • Yr-end est. cut by 20bps to 1.80%; end-2017 forecast also lowered by 20bps to 2.05%
  • Less positive on U.K. economic outlook, expect inflation to be lower for longer; still see MPC rate hike late in 2016
    • Later rate increase will delay move higher in longer yields; expect 10Y gilt yields to rise “relatively slowly” compared to previous cycles
    • Remain more optimistic on timing vs market pricing; short-dated interest rate markets imply ~50% chance of rate cut over next year, do not fully price an increase until late 2019
  • NOTE: UBS Pushes Back BOE Bank Rate Increase to Nov. 2016
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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John Wraith (UBS Global Asset Management Japan Ltd)

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