(Bloomberg) — UK government debt rallied, driving the two-year yield below 4% for the first time this year, as investors bet the Bank of England will soon start easing monetary policy.
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The rate fell as much as eight basis points to 3.99% ahead of closely-watched UK inflation and jobs reports this week that will potentially influence the BOE’s stance. Data earlier Tuesday showed grocery-price increases decelerated to the lowest pace in almost three years.
Calls for rate cuts are growing louder given headline consumer-price growth has already slowed to policymakers’ 2% target, attracting investors back to UK bonds. The annual rate will ease further to 1.9% in June, according to the median estimate in a Bloomberg survey of economists.
Money markets are pricing two quarter-point cuts from the BOE this year, with the chance of a first reduction next month at just below 50%.
“Dovish data this week would really help in providing the cover to cut in August,” said a Citigroup Inc. team including Jamie Searle, who recommend a swaps position that would benefit…
