SNAPSHOT2 min read

LDI Market Bulletin - December 2023

A comprehensive market update on interest rates, inflation, and bond markets for institutional investors.

19/01/2024
Santa--happy-on-hols
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Authors

Phil Howard
Head of LDI Solutions Management
Owen Davies
LDI Solutions Manager

Top Headlines

1. Market expects BoE to cut interest rates in May 2024

The larger-than-expected fall in inflation has left markets expecting a 0.25% cut before May 2024, with rates predicted to fall by 1.38% over the entirety of 2024. This is despite comments from BoE deputy governor Ben Broadbent, who announced on 18th December the Bank is awaiting certainty on the state of the UK’s labour market as confirmation that inflation has firmly cooled before the BoE could consider cutting interest rates.

2. 2023 ends with a ‘Santa Rally’

Falling inflation and increasingly dovish attitudes towards rate cuts led to a rally in the gilt market. Traders’ confidence in a reduction in cost of borrowing led to Britain’s benchmark 10-year gilt yields temporarily falling close to 3.5% at the end of December - its lowest level since 6th April 2023. This impact was echoed in the US and Europe, with US 10-year Treasury yields hitting a five-month low, and Germany’s 10-year bond yields falling below 2% for the first time since March 2023.

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Authors

Phil Howard
Head of LDI Solutions Management
Owen Davies
LDI Solutions Manager

Topics

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