UK govt bonds jump on dovish BoE minutes showing one vote for a rate cut |
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Wed, 21 Mar 2007 11:13
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LONDON (AFX) - UK government bonds jumped on news that the Bank of England voted 8-1 in favour of leaving interest rates unchanged, with the added surprise that the dissenter, David Blanchflower, voted for a rate cut.Analysts were expecting a 7-2 vote for unchanged rates, expecting the dissenters to have voted for a rate hike. A vote for a rate cut was far off analysts' radar.The minutes were relatively dovish, with the members noting that data since the last meeting had been mostly to the downside, suggesting that 'the upside risks to inflation from wage growth might have started to diminish.''The (BoE) now has a three way split on its hands and that poses problems for (governor) King getting the next rate hike through,' said David Brown at Bear Stearns.He noted that if King doesn't managed to convince his board to hike rates by May, an expected fall in inflation will mean rates will likely peak at the current 5.25 pct and markets will focus on when rates will head back down.The inflation data, which yesterday came in above expectations, was not available to the BoE rate-setters at the time of their decision.The June gilt future jumped to 109.18 from 108.93 before the news, whereas the 10-year reached 93.93 from 93.70.carlo.piovano@thomson.comcp/cp/roCOPYRIGHTCopyright AFX News Limited 2007. All rights reserved.The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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UK govt bonds rise after close vote for Jan BoE rate hike; European issues down 