The Gilt Market Has No Love for Forward Guidance

Since the Monetary Policy Committee delivered its framework for forward guidance, the markets have done the opposite of what the Bank had hoped for

M&G Investments 29 August, 2013 | 5:18PM

This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here, Richard Woolnough of M&G explains why the gilt and currency markets have no love for Mark Carney's forward guidance.

Mark Carney and the Bank of England has had an unproductive time of it in the East Midlands as the new Governor gave his first speech in the role to the CBI, Chamber of Commerce and the Institute of Directors.

Since the publication of the August Inflation Report, in which the Monetary Policy Committee delivered its framework for forward guidance, the markets have done the opposite of what the Bank had hoped for. The gilt market has sold off – not just at medium and long maturities, which are largely outside of direct Bank control and are more dependent on global bond market trends, but also at the short end, where 5-year gilt yields have risen by 20 bps in under a month.

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