UK Interest Rates May Be Overdone in Hawkish Pricing

UK interest rates have been pricing in a hawkish narrative that may be overdone. According to Michiel Tukker, UK rates look too high relative to Bank of England guidance and macro fundamentals. Despite this, oil price uncertainty and fiscal risks are sustaining a risk premium.

The 10-20y US Treasury buyback operations will also receive attention in the near term. This complicates an otherwise bullish structural outlook for UK rates.

UK interest rates have been reflecting a very hawkish narrative, which may be overdone relative to central bank guidance and macro fundamentals. The current pricing seems to be ignoring certain factors that could impact the market.