May 10, 2018 / 10:32 AM / 9 months ago

HSBC cuts year-end forecast for British gilt yields

FILE PHOTO: The HSBC bank logo is seen at their offices in the Canary Wharf financial district in London, Britain, March 3, 2016. REUTERS/Reinhard Krause/File Photo

LONDON (Reuters) - HSBC said on Thursday it has revised down its year-end forecast for 10-year British government bond yields by 30 basis points to 1 percent, citing weaker-than-anticipated economic growth.

Britain’s 10-year gilt yield is trading at 1.45 percent GB10YT=RR, little changed ahead of a Bank of England monetary policy decision. The bank is expected to keep rates on hold.

“The economy has slowed more quickly than we had anticipated, and we now think further rate hikes are off the table for the foreseeable future,” Daniela Russell, head of UK rates strategy at HSBC, said in a note.

“A weaker economic backdrop, alongside receding inflationary pressure, should support a fall in yields in the second half of the year.”

HSBC became one of the few banks to erase its solitary UK rate hike call for 2018, saying at end-April that likely downward revisions to the BoE’s growth forecasts in May would make it harder to justify a rate hike.

In its note on Thursday, HSBC said its downward revision for 10-year bond yields pushed the bank further below a consensus estimate of 1.80 percent.

Reporting by Dhara Ranasinghe; Editing by Saikat Chatterjee

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