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Negative gilt yields won’t be common

The fall in gilt yields into negative territory on Monday implies that investors think that the Bank of England will cut interest rates to emergency levels and keep them there for the foreseeable future. We expect a 25bps cut to 0.50% soon. But as the hit to the economy from the coronavirus is likely to be temporary and fiscal policy is becoming more supportive, we suspect that the markets have gone too far.

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