Yesterday’s warning from the Office for Budget Responsibility (OBR) that the government’s UK debt/GDP ratio could balloon to more than 500% during the next fifty years in a “downside” scenario has barely caused a ripple in the Gilt market. Admittedly, the 50-year yield has risen by about 5bp. But at little more than 0.5%, it remains extremely low by past standards. In our view, Gilt yields will not rise by much in the next few years at least, despite the OBR’s gloomy fiscal outlook.
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