3. Against countries like Japan, Switzerland & Germany the UK 10 Year Government Bond Yield is more attractive for investors causing money to move into the UK from these countries and the pound has been getting stronger against all three currencies as a result of the UK’s Bond Yield rising.
4. The Bank of England said on May 27th that if people are moved off furlough back into work at a faster pace than previously expected, The Bank of England may be forced to withdraw some of its monetary stimulus and potentially raise interest rates as will rise as the demand for goods and services rise from employment and the re-opening of the economy.
6. This scenario means the will be forced to act and withdraw its monetary support to curb by reducing its bond-buying program, causing the price of bonds to decline and pushing up the Yield due to their inverse correlation.
7. A rate hike would also cause UK short-term rates to move into a profitable carry trade against currencies like the Japanese Yen & CHF & EUR.
What To Watch
Rate Hike Expectations
UK Bond Yield’s