Bank of England Governor Calls for Reduced Bond Market Volatility Amid Tariffs
In a recent event in Brussels, Belgium, Bank of England Governor Andrew Bailey expressed his desire for reduced volatility in bond markets. Much of the current instability, he attributed to a series of announcements regarding US tariffs.
Governor Bailey noted the significant influence of the US on UK markets, particularly with President Trump's use of tariffs and trade actions to negotiate concessions from China and Europe. As a result, yields across major bond markets have surged in recent months due to investors' concerns about potential inflation from Trump's trade policies.
The 10-year yields for both the UK and the US have increased by nearly a percentage point since September. Bailey suggested that much of this increase is reflected in the term premium, which represents the additional compensation demanded by investors for holding long-term debt.
Bailey also commented on the statements made by US Treasury Secretary Scott Bessent, who highlighted the importance of the 10-year Treasury yield as a key economic indicator. Bailey expressed agreement with Bessent's sentiment, stating that market participants would welcome reduced volatility in this area.
Despite the recent surge in inflation, Bailey downplayed concerns about a resurgence in UK price pressures. He attributed the expected inflation rise to regulated prices, such as energy bills, rather than fundamental economic factors.
In closing, Governor Bailey emphasized the ongoing weakness in UK growth compared to previous expectations.