Pimco sees markets underpricing BOE interest-rate increase cycle
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."