The further drop in gilt yields appears to have reflected declining expectations for GDP growth and related falls in long-term interest rate expectations, rather than fiscal developments. Indeed, the spread of gilt over German bund yields has widened in recent weeks as sentiment in euro-zone bond markets has improved, while the cost of insuring against UK default has remained on an upward trend. Meanwhile, evidence suggests that the Monetary Policy Committee’s asset purchases are continuing to have much smaller effects on gilt yields than the first round of purchases in 2009/10.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services