(Bloomberg) -- Investors are rushing to buy U.K. bonds, buoyed by the Bank of England's tempered outlook on further policy tightening.
Benchmark borrowing rates on U.K. debt tumbled for a second day, leading U.S. and German peers lower, while money markets wasted no time paring BOE tightening bets following policy makers' third successive quarter-point interest-rate increase on Thursday. They're now betting on four more quarter-point hikes this year, compared with five on Wednesday.
“I'm starting to think there will be a time not far in the future where current bond valuation will look cheap and disconnected from forward-looking economic indicators,” said Antoine Bouvet, a strategist at ING Bank NV. Composite U.K. purchasing managers' index figures for March next week are expected to signal a slowdown.
Policy makers are already grappling with inflation at a four-decade high and expected to rise when February's figures are released next week. On top of that, attention is turning toward higher energy prices and downside growth risks following Russia's invasion of Ukraine.
ING's economists forecast only one more quarter-point hike this year compared with the four expected by money markets. “Money market pricing remains aggressive,” Bouvet added.
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