UK Gilts: Post-Budget relative outperformance – Deutsche Bank

10-year UK gilt yields have fallen markedly since the Autumn Budget. In a Deutsche Bank Research note, Shreyas Gopal, Sanjay Raja and Maui Brennan attribute the decline partly to lower oil prices and increased equity volatility.

UK gilts outpace global peers

"10y gilt yields have fallen almost 25bps since the Autumn Budget. Global factors, such as the welcome fall in oil prices, have undoubtedly played a large role in this fall in borrowing costs, alongside an increase in equity market volatility."

"10y gilt yields have fallen by about 12bps more than their US and German equivalents, partly due to the event meeting our three pre-Budget benchmarks around headroom, near-term consolidation, and total gilt issuance."

"This relative outperformance over the past two weeks is even more notable given it has occurred either side of a more hawkish than expected Bank of England meeting last week – when UK bond yields rose by 5bps more than its peers. As such, even if not quite as stark as last year’s post-Budget gilt outperformance, we expect the Chancellor will be content with the market reaction to his first Budget."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)