UK gilts tad up ahead of BoE’s monetary policy meeting, Governor Carney’s speech

The United Kingdom’s gilts remained tad higher during European trading hours Wednesday ahead of the Bank of England’s (BoE) monetary policy meeting, scheduled to be held on November 7 by 12:00GMT, followed by Governor Mark Carney’s speech on the same day.

The yield on the benchmark 10-year gilts, slipped nearly 1-1/2 basis points to 0.764 percent, the 30-year yield remained flat at 1.288 percent and the yield on the short-term 2-year edged tad 1 basis point down to 0.576 percent by 10:30GMT.

Although the Office for Budget Responsibility (OBR) won’t expose the full deterioration in the public finances when it updates its forecasts on Thursday, it’s clear that it is only a matter of time before borrowing smashes through the targeted level. That said, regardless of who wins the election, a new set of fiscal rules will probably allow a big fiscal expansion that supports the economy, Capital Economics reported.

The Chancellor, Sajid Javid, may have been relieved to learn that on Thursday 7th November the OBR will not update its borrowing forecasts to reflect the spending pledges announced in September’s 2019 Spending Round and the worsening economic and fiscal backdrop, the report added.

Instead, the OBR’s new forecasts will be more of a holding exercise in place of the full suite of fiscal forecasts that would have been published alongside the Budget on 6th November had it not been postponed. Indeed, the OBR will take into account only some methodology changes, Capital Economics further noted in the report.

Meanwhile, the FTSE 100 remained tad down at 7,378.85 by 10:35GMT.