A few weeks ago, a British government official privately joked to me that London’s markets have become “chained to a drunken dragon”.
The reason? Gilt yields used to move (mostly) in response to British fundamentals. But Bank of England research suggests these are increasingly being knocked about by US government bond prices.
That is ironic, given how keen the British government — like the rest of Europe — is to exert economic sovereignty and ringfence the UK from America. It is also dangerous: prices in the once boring Treasuries market are now thrashing around wildly in response to President Donald Trump’s capricious policy plans.
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