Reeves Is Battening Down the Gilt Hatches
For UK bonds, shortening duration is the right way to go.
In politics, the first rule of holes, according to former Labour Chancellor of the Exchequer Denis Healey, is to stop digging. His modern-day successor, Rachel Reeves, has bought into this bit of sagacity — at least when it comes to the bond market.
It may not draw much attention but for the second time this year the UK Treasury's Debt Management Office has indicated it will significantly cut the duration of its expected gilt issuance in the coming quarter. Though the amount being sold hasn't altered — the government needs the money after all — the length of time it’s borrowing for has shortened noticeably. That means there will be a lot less new supply in the struggling longer end of the yield curve.