Interest rate cuts already discounted by short end

Schroders believes UK interest rates will fall by 50 basis points this year but that much of this is already priced into the gilt market. Bernard Abrahamsen, head of UK fixed income at Schroders, said the group believes UK interest rates will fall from 6% to 5.5% over the next six months. But the short end of the gilt market has already discounted a lot of these expectations with, for example, three year gilts offering a yield of 5.2% and gilts which will mature in 11 months' time offering a yield of 5.3%. Abrahamsen says: "We believe the UK economy is slowing towards just below trend gro...