Will forward guidance provide a major boost to Gilts?

The UK MPC’s "forward guidance" had little initial impact on Gilts on Wednesday but we still think it will help them to outperform US Treasuries over time. That being said, we do not expect the 10-year Gilt yield to fall throughout our forecast window. Although we think it may drop back to 2% by end-2013 (from about 2.5% now), we forecast it to be up at around 3% by the end of 2015. 

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