Global forces drag down gilt yields

We doubt that the downward pressure on UK gilt yields from the weaker global economy will fade over the next year. In the near term, the 10-year gilt yield may therefore fall below its current two-year low of 1.0%. And if there were a no deal Brexit on 12th April, then domestic factors would exacerbate the influence from overseas and gilt yields would fall sharply. But if a deal were agreed before 12th April or if Brexit were delayed for a long time, the prospect of interest rate hikes from the Bank of England would mean that government bond yields in the UK rise even as yields overseas fall.