Interest rate & currency outlook

Cannot believe how calm the gilt market is, considering the ever closer risk of the U.K. not getting a deal, certainly not a good one, from Brussels. Outlook for GBP, FTSE and gilts surely ominous, yet bonds seem to find buyers with no margin over inflation, significant credit risk and poor or non existent covenants. The mind boggles..


  • GBP and FTSE have some issue priced in from pre vote relatives. The one I think odd is the gilts market, especially longer end of curve
  • 'the ever closer risk of the U.K. not getting a deal' > This is known risk > Point > It's already in the price. GBP is already pretty under valued. It's bounce from 1.2 last year should provide a hint. And unlike Greece, it actually owns its own currency and not borrowing in somebody else's currency. With trade gone, economy is going to suffer, inflation is going to suffer, and bonds are great in deflationary environment, yeah i'll buy some. What's more, equities do poorly with no inflation, so that puts more money away from stock market to bond market.
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