The Risks Surrounding Brexit Can Be Found in U.K. Bond Markets
- Gilt yield curve is near the flattest in more than two years
- Inflation markets are signaling a surge in price expectations
This article is for subscribers only.
The pound may have been relatively calm in recent weeks, but U.K. bond markets are seeing signs of Brexit-induced distress.
Investors have been flocking to the safety of longer-dated gilts, preferring them over shorter maturities, a sign that they think the risks surrounding the economy are growing. At the same time, they are betting that inflation will become a headache for policy makers, a scenario that is likely if the U.K. were to tumble out of the EU without a deal, sending the pound plummeting and the costs of imports soaring.