The flight to quality bid for sovereigns after the invasion of Ukraine quickly reversed and yields resumed their march higher.
Central banks hiked to counter inflationary pressures now intensified by the conflict, the Bank of England hiking by 25bp and the Fed by the same, possibly holding off from 50bp to avoid denting confidence too much. The number of US hikes is forecast to be anywhere up to nine and the 10-year moved over March from 1.73 to 2.34%, the curve bear flattening as the short end also played catch up.
The Sterling primary market saw a few issues but volatility meant that some were delayed. We saw quality covered 5-year floating issuance from the Bank of Montreal and we took some enabling us to term out our floating rate note exposure, selling some Yorkshire Building Society 23’s and EBRD 25’s. We sold some short dated Northumbrian Water 6.875 23’s, these have served the fund well but are feeling the pull to redemption. Natwest Group came to market with a 7-year Senior non-preferred paying Gilts +210bp which we funded by taking profits on some of our infrastructure holdings, selling some HICL and INPP, both of which have performed well in recent volatility but are liable to come to market to raise capital.
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