Bank calls gilt bubble

easing in prices at short end of the curve likely, according to SSSB analyst michael saunders

A bubble is forming in the government bond market, according to SchroderSalomonSmithBarn-ey (SSSB). Analyst Michael Saunders noted the continued rally in gilts is pushing values to even more extreme levels at both the short and long ends of the yield curve. Saunders believes the downside risk to UK growth and inflation is nowhere near as bad as the market has priced in. This could trigger an easing in prices at the short end of the curve, he said. However, there is less of a short-term risk to prices at the long end. 'The dash for bonds continues to stretch valuations to even greate...