LONDON- Fund managers are betting on a further rise in British government bond yields as the UK's rapid COVID-19 vaccination rollout, an economic reopening and an expansionary budget this week brighten Britain's economic outlook.
JP Morgan Asset Management international CIO Iain Stealey said on Tuesday that he had positioned for a further selloff in British bonds -- and thereby a rise in yields -- while simultaneously buying government bonds in Germany where yields look set to remain low.
"Everything is looking positive for the UK...It does look like we are on for a reopening in June," said Stealey, who reckons 10-year gilt yields can rise another 25 basis points to above 1% from the current 0.77% GB10YT=RR .
He expected Wednesday's UK budget would be "very supportive" with Finance Minister Rishi Sunak unlikely to take "his foot off the pedal".
AllianceBernstein's co-head of European fixed income, John Taylor, told Reuters he had also positioned for UK yields to rise and that 1% could be reached "relatively quickly".
Given "the expectation of growth" it was unlikely anyone would be pushing for a Bank of England rate cut over the next six months, he added. But he cautioned that any meaningful increase in UK borrowing costs would only be in 10-year and longer-dated bonds.
(Reporting by Tommy Reggiori Wilkes; Editing by Dhara Ranasinghe) ((thomas.wilkes@tr.com; +44 (0) 7769 955711;))
