Bonds15 Nov 2023 19:31
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UK secures record orders for bonds as inflation drops to 4.6pc
15 November 2023 • 6:13pm
Canary Wharf in London, showing the headquarters of HSBC and Barclays Bank
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Investors acquired a record £93bn of UK government bonds during a sale today, it has been reported, as investors bet that interest rates have peaked.
The sale of 20-year gilts fetched the largest ever level of orders for UK sovereign bonds, excluding the first ever sale of “green bonds” back in 2021, according to Bloomberg News.
The sale of the bonds, which mature in 2043, was conducted by Barclays, HSBC, Lloyds, Morgan Stanley and UBS.
The race to snap up bonds comes as investors bet that interest rates will begin to fall next year amid falling inflation.
The UK consumer prices index (CPI) dropped sharply to 4.6pc in October from 6.7pc the previous month, according to the Office for National Statistics (ONS), after a slowdown in the increasing cost of gas and electricity.
inflation eases
Line chart with 34 data points.
Annual CPI rate
View as data table, inflation eases
The chart has 1 X axis displaying categories.
The chart has 1 Y axis displaying %. Data ranges from 0.4 to 11.1.
Jan 2021
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Nov 2021
Jan 2022
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Nov 2022
Jan 2023
Mar 2023
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0
2
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12
SOURCE: ONS
INFLATION EASES
Annual CPI rate%
End of interactive chart.
As a result, money markets are pricing in that the Bank of England will begin cutting interest rates by a quarter of a percentage point by June at the latest, with some economists predicting rates will be cut sooner.
When interest rates are high, the yield on bonds - the return for investors - is higher and vice versa.
Global bonds have rallied in recent days as traders ramp up bets that central banks will begin cutting interest rates next year, with 20-year gilts now yielding around 4.6pc, down from a peak above 5pc last month.
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