Sterling interest rates are rising on improved UK growth signals, threatening to delay the Bank of England's first rate cut. However, the underlying trend is still seen as downward for the year. Meanwhile, US Treasury yields face mixed signals, but continue to attract substantial foreign investment, as confirmed by strong November inflow data showing significant participation from key allied nations.
Major Points :
UK Rates: Short-Term Push vs. Long-Term Pull
Near-Term Pressure: Strong UK growth data is pushing sterling rates higher and could delay Bank of England rate cuts. Upcoming hot inflation/jobs data may further shift expectations from a March cut to April.
Broader Trend: Despite recent moves, the analysts' core view remains that UK rates (like the 10Y gilt yield) will trend lower by year-end, driven by falling inflation and muted growth.
US Treasuries: Sustained Foreign Demand
Robust Appetite: The latest TIC data shows strong foreign buying of US securities, with $220bn in total net inflows for November.
Key Players: Major buyers include the UK, Japan, and Canada. China continues to be a large, persistent net seller of Treasuries.
Ownership Breakdown: Foreigners hold 33% of US Treasuries, underscoring the market's global reliance.
