UK 2Year Gilt Yield Hits Record Low on New COVID Crackdown


The yield on twoyear British government bonds fell to a record low on Monday after the government imposed tougher coronavirus restrictions, raising fresh fears about the outlook for Britains economy.

The yield on twoyear gilts which is sensitive to speculation about Bank of England interest rates fell as low as 0.161 before recovering to 0.138 at 1017 GMT, down about six basis points on the day.

Prime Minister Boris Johnson imposed tougher curbs on London and southeast England on Sunday to slow the spread of a more transmissible variant of the coronavirus, and his health minister said the country had a long way to go to sort this.

Several countries in Europe cut transport ties to the United Kingdom, adding to the deep uncertainty facing the British economy ahead of the Dec. 31 deadline for a postBrexit trade deal with the European Union.

Britain is on course to suffer its biggest economic contraction in three centuries this year, and its recovery is expected to be among the slowest for leading economies around the world.

Benjamin Nabarro, an economist with Citi, said the travel ban, including a suspension of freight transport between Britain and France, would aggravate the Brexit hit which Citi estimates will wipe 2 off Britains economy in 2021.

This risks compounding the costs of Brexit, and that is going to be the bigger shock, Nabarro said.

The yield on 10year gilts fell more than seven basis points to as low as 0.171, its lowest since Dec. 11. Comparable…

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