The U.K.'s Bond Selloff Could Spread to the U.S.
- Two-year gilt yields have surged in the past three months
- Fed tapering could spur big moves in front end of U.S. curve
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The front end of the U.K.’s yield curve hasn’t seen such a violent move in years. That selloff could yet make its way to the U.S. if money markets grow in conviction that the Federal Reserve may have to raise rates at a pace faster than previously thought.
The yield on two-year gilts has surged a phenomenal 65 basis points since the end of July as traders upended prior views that placed the Bank of England’s first rate increase in November next year. So much so that the monetary authority’s policy review Thursday -- earlier thought of as a do-nothing meeting -- is now considered live.