27 Apr 2016
UK Rates: Sensitive to policy uncertainty, beware the BoJ - TDS
Renuka Fernandez, Senior Rates Strategist at TD Securities, notes that following the surprise cut from the BoJ in January, UK rates reacted sharply falling on average two standard deviations across the swap surface.
Key Quotes
“These moves were exacerbated by rising concerns around the EU Referendum and a very dovish BoE Inflation Report shortly thereafter.
This time around, we do not expect any surprise cuts from the BoJ, so do not expect an extreme move lower in UK yields on the back of the meeting. However, if they do surprise with more cuts to policy rates, then we would expect UK rates to fall, but for the fall to be somewhat buffeted by lower Brexit premia and a BoE that has stated they will be less sensitive to data ahead of June. We would expect the fall in yields to be up to 10-15bps on the short end and 15-20bps on the longer end.”
Key Quotes
“These moves were exacerbated by rising concerns around the EU Referendum and a very dovish BoE Inflation Report shortly thereafter.
This time around, we do not expect any surprise cuts from the BoJ, so do not expect an extreme move lower in UK yields on the back of the meeting. However, if they do surprise with more cuts to policy rates, then we would expect UK rates to fall, but for the fall to be somewhat buffeted by lower Brexit premia and a BoE that has stated they will be less sensitive to data ahead of June. We would expect the fall in yields to be up to 10-15bps on the short end and 15-20bps on the longer end.”