Rising yields attract official institutions' attention to UK government bonds
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(1) NatWest Markets CEO Jonathan Peberdy stated that, due to the sharp rise in UK government bond yields, official institutions—including central banks—are showing strong interest in them for the first time. (2) At the conference, Peberdy said that many investors believe the current interest rate levels are highly attractive for investment and are seriously considering entering the UK government bond market, with some of them doing so for the first time. He further revealed that these first-time interested investors include official institutions or central banks with relatively small GBP investment positions (also sovereign wealth funds and governmental departments), who are considering increasing the allocation ratio of GBP in their portfolios. (3) Since the outbreak of the Iran war at the end of February, the UK 10-year government bond yield has risen by 60 basis points, the most among developed economies. In addition, uncertainties regarding the prospects of Prime Minister Keir Starmer’s administration and a possible leadership contest have also added pressure to the market. Peberdy did not disclose the regions these institutions are from but stated that they are not from Asia. According to IMF data, GBP accounts for around 4.4% of global foreign exchange reserves.
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