Hornbach: August BOE Cut Will Support Gilt Yields

The transcript discusses the UK economic outlook, focusing on disappointing data and potential actions by the Bank of England, including rate cuts and quantitative easing, in response to Brexit. It also covers global economic indicators, the US labor market, and the yield curve, highlighting the potential for further quantitative easing by the Fed. The conversation touches on political risks, such as the impact of a potential Donald Trump presidency on international investment and US Treasury yields.

What is the expected action by the Bank of England by the end of August according to the Chief UK economist?

• Reduce quantitative easing

• Increase interest rates

• Implement a rate cut

• Introduce new taxes

What could potentially cause the 10-year treasury yield to go lower than 1%?

• A rise in inflation rates

• Anticipation of additional QE from the Fed

• An increase in consumer spending

• A decrease in global oil prices

What is the term premium in the context of interest rates?

• The base interest rate set by the central bank

• The expected inflation rate over the term of the bond

• The additional yield investors demand for taking on duration risk

• The difference between short-term and long-term interest rates

How has the US labor market performed over the past six years?

• Average employment gains have been below 100,000 per month

• There has been a consistent decline in employment

• Average employment gains have been above 200,000 per month

• The labor market has been stagnant

What is a potential risk for international investors if Donald Trump were President?

• Stability in U.S. dollar assets

• Increased international cohesion

• Predictable economic policies

• Unpredictability and changes in international relations