Theresa May has confirmed that Article 50 will be triggered on the 29th March – will this prove to be a catalyst for showing some UK ‘buyers’ remorse’ following last year’s vote to leave the EU?

In the short term we’ve seen little evidence of such sentiment – business investment has held up surprisingly well and consumer spending has been resilient despite the pinch of imported inflation. The UK has also (so far) avoided signs of institutional instability – there has been no evidence of an overseas buyers’ strike for Gilts.

On a longer-term view we’re still assuming the mood music that we ‘ain’t seen nothing yet’. If this is the case, Bank of England support will become relevant again. Right now the hurdle to more QE is lower in the UK than in anywhere else – although next time we expect a more reactive stance, so we must see some poor economic data first.

With this backdrop we will at some point want to be long UK gilts versus other core markets like US Treasuries. But not yet. We still expect that gilts could underperform in the short term as the Bank of England steps away from the market. To make money we will implement active, tactical trades – to exploit the market’s under or overreaction in the next nine days, and beyond.

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