U.K. Rate Bets Force Investors to Ponder Life After BOE Support

Investors are coming to terms with the prospect that the Bank of England could scale back support for the gilt market sooner than expected, Bloomberg News reported. Traders are now betting the BOE will raise the key interest rate to 0.5% in February. That’s the threshold after which the bank may let gilts that mature in its 875-billion pound ($1.2 trillion) asset purchase program roll out of the portfolio without being replaced. With inflationary pressures building and officials taking an increasingly hawkish tone, some investors expect that could happen as early as March, when a 28-billion pound gilt comes due. It’s a daunting prospect for a market already grappling with the end of the BOE’s bond-buying program, slated for December. Since 2009, in the wake of the financial crisis, the central bank has bought around one-third of the total stock of government debt, according to the Office for Budget Responsibility. Read more.