Anna Macdonald, investment strategy director at Hargreaves Lansdown, highlights renewed pressure on UK bond markets as political uncertainty and elevated oil prices add to inflation concerns and unsettle investors.
Anna Macdonald, Investment Strategy Director, Hargreaves Lansdown:
“The UK’s bond markets are weaker today across the curve, on continued political uncertainty which is compounded by President Trump’s comments on a deal with Iran, where he described the ceasefire as on ‘life support’. Elevated oil prices add inflationary pressure to a bond market already frazzled by concerns that a different UK Prime Minister might take a different view on borrowing, relaxing fiscal rules or extending them, and may introduce more legislation that the market would view as potentially damaging to economic growth. This would mean that investors, of which 25-30% are overseas buyers of UK government bonds, demand a higher risk premium.
Cable is weaker, with Sterling falling 0.6% against the US dollar (compared with the Euro weakening by 0.3% against dollar).
At the time of writing, the domestically focussed FTSE250 is down 0.75%, actually a little less than the FTSE100 at the time of writing. The UK’s biggest banks Natwest, Barclays and Lloyds, are the biggest losers on the FTSE, ahead of the cabinet meeting this morning. Perhaps shorter-term worries about borrowing costs and effects on both commercial and household finances are weighing on investors’ minds this morning.”