COMPETITIVE · MARKET STRUCTURE · REGULATORY · ASIA
Markets price out BoE rate cut
Change
Money markets have priced out a Bank of England rate cut for the 19 March meeting and two-year UK gilt yields rose to 4.14%.
Why it matters
Brent crude is trading above $100 per barrel and is on track for its highest close since 2022. European equity markets remain in negative territory after earlier steep losses and following declines in Asia-Pacific markets. Two-year UK gilt yields rose to 4.14%, up from 3.52% before the crisis began. Money-market pricing assigns a 93.5% probability that the Bank of England will hold rates on 19 March and a 6.5% probability of a hike.
Implications
- • Higher two-year gilt yields increase immediate borrowing costs on new short-dated UK government issuance.
- • Fixed-income portfolios with short-duration gilt exposure will register mark-to-market losses as yields rise.
- • Valuations of interest-rate–sensitive assets will incorporate higher near-term discount rates.
Who is affected
- • Bank of England policymakers
- • UK Debt Management Office and treasury operations
- • Fixed-income traders and portfolio managers
- • Institutional investors with UK interest-rate exposure
What to watch
- • Bank of England policy meeting on 19 March
Source
Topics
Business & Markets Markets Economy Finance & Banking Monetary Policy