Relative Performance of U.K. Bonds Hinges on New Year’s Data

It’s a waiting game for U.K. rates to see whether growth bounces following the election or if uncertainty remains entrenched.

Investors will still see value in gilts next year, particularly on a cross-market basis, if the growth outlook doesn’t materially improve. Tightening pressure with bunds may remain if growth prospects diverge and Brexit uncertainty rises during the transition phase. Conditional expressions may be favored for the case of confidence returning to the U.K.