Today’s hawkish surprises from both the Bank of England and the ECB reinforce our view that the yields of long-dated government bonds in the UK and euro-zone will rise over the next two years and that euro-zone “peripheral” spreads will widen. That said, policymakers’ increasingly aggressive stance suggests there is a risk that moves in 10-year yields may be larger, and closer to those in the US, than we currently forecast.
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