RBC: UK government bonds may rise in the short term, but expectations for interest rate cuts seem to be too high

Analysts at Royal Bank of Canada Capital Markets said that British government bonds may rise in the short term, pushing yields lower, but the market's expectations for interest rate cuts may be too high, which may reverse the bullish trend. From a technical point of view, the short-term momentum is biased towards bond bulls, with the yield on the 10-year benchmark gilt near a new daily cycle low yesterday, they said. Fundamentally, however, analysts believe that the rate cuts currently being digested by the market look "quite aggressive" in an environment where some forward-looking survey data, such as PMIs, appear to be bottoming out or turning higher.