Pimco sees mar­kets un­der­pric­ing BOE in­ter­est-rate in­crease cy­cle

The Pak Banker - - COMPANIES/BOSS -

Even af­ter the Bank of Eng­land's "Su­per Thurs­day" dis­ap­pointed in­vestors look­ing for a more hawk­ish pol­icy tone, they're un­der­es­ti­mat­ing po­ten­tial U.K. in­ter­est rate in­creases, ac­cord­ing to Pa­cific In­vest­ment Man­age­ment Co.

The BOE's Mon­e­tary Pol­icy Com­mit­tee this week voted 8-1 to keep its key rate at a record low.

Traders still pre­dict it will be one of the first cen­tral banks in de­vel­oped mar­kets to make the move. The av­er­age ratein­crease cy­cle since the BOE's in­de­pen­dence in 1997 to­taled 130 ba­sis points, or 1.3 per­cent­age point, ac­cord­ing to Mike Amey, a Lon­don-based money man­ager at Pimco, which over­sees about $1.52 tril­lion of as­sets.

"The cu­mu­la­tive 125 ba­sis points priced in for this cy­cle looks low based on history and our out­look for the econ­omy," Amey wrote in an e-mailed note. "U.K. in­vestors should con­tinue to look else­where for bet­ter value in their bond-mar­ket ex­po­sure."

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