First time since May 2009, this. The five-year gilt yield has fallen under the yield on five-year Bobls (chart via Bloomberg, click to enlarge):

Meanwhile, 10-year gilts are trading the tightest to their bund peers since late 2009 (chart via Bloomberg, click to enlarge):

The more you cut, the more you QE to make up for it, perhaps.

Keep this up, and the Bank of England won’t even have to bother going ahead with QE, so much has the market priced it in. Handy when Mervynflation is already so high, that.

Related links:
A record GBPEUR 2-yr swap spread – FT Alphaville
Something for Mr Posen and his friends - FT Alphaville
More gilt-free bloodshed – FT Alphaville

This entry was posted by Joseph Cotterill on Thursday, October 21st, 2010 at 15:47 and is filed under Capital markets. Tagged with bank of england, bunds, Deflation, gilts, government bonds, inflation, Monetary policy, qe, qe2, quantitative easing, UK, uk economy. Edit this entry.