Back
2 Jun 2015
Scope for excitement in BoE Carney’s June 10th speech – BAML
FXStreet (Barcelona) - Mark Capleton, Rates Strategist at BofA-Merrill Lynch, notes that the case builds ahead for real yield curve steepeners in UK.
Key Quotes
“With the May Inflation Report having focused market pricing of the first rate hike around the middle of next year, this week's MPC announcement is set to follow the usual format.”
“However, scope for some excitement from the Bank follows next week with Governor Carney's address at the annual Mansion House Dinner (10 June). Markets may have short memories, but they will not have forgotten last year's unexpectedly hawkish speech. It may seem counterintuitive, with the economy likely to be flirting with deflation for the balance of this year, but we now believe it is time to enter real yield curve steepeners.”
“The UK real curve is exceptionally flat (at a very low level) and unless 1y inflation expectations fall a lot further, we believe carry will be nicely positive for the next 12 months.”
Key Quotes
“With the May Inflation Report having focused market pricing of the first rate hike around the middle of next year, this week's MPC announcement is set to follow the usual format.”
“However, scope for some excitement from the Bank follows next week with Governor Carney's address at the annual Mansion House Dinner (10 June). Markets may have short memories, but they will not have forgotten last year's unexpectedly hawkish speech. It may seem counterintuitive, with the economy likely to be flirting with deflation for the balance of this year, but we now believe it is time to enter real yield curve steepeners.”
“The UK real curve is exceptionally flat (at a very low level) and unless 1y inflation expectations fall a lot further, we believe carry will be nicely positive for the next 12 months.”