Gilts Could Benefit from Potential Repricing of BOE Rate Expectations

Dow Jones10-20

0941 GMT - Shorter-dated U.K. government bonds, or gilts, look attractive as expectations for Bank of England interest-rate rises are overdone, Nuveen's Laura Cooper says in a note. "For gilt investors, we think the bigger risk is that markets have priced in too much tightening, not too little fiscal restraint." The BOE could deliver an insurance rate increase in November but that move could be reversed in 2027 as the drag on growth builds, she says. Nuveen favors five-year gilts, which offer exposure to a potential repricing of BOE expectations without the same sensitivity to fiscal risks and term premium further out the curve if the October 28 budget disappoints. The five-year gilt yield falls 2.3 basis points to 5.021%, Tradeweb data show.

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