Mark Carney's summer rate cut hint sends gilts into negative territory

Jessica Morris
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Carney suggested interest rates would fall (Source: Getty)

After much speculation, it's finally happened — gilts dipped their toe into negative territory earlier today.

The yield on a UK gilt maturing in March 2018 fell from 0.14 per cent earlier today to just minus 0.003 per cent.

Read more: The pound dived after Mark Carney laid the groundwork for a rate cut

It came after Bank of England governor, Mark Carney, suggested that the benchmark interest rate would fall. It would be part of the central bank's response to a prolonged period of uncertainty following the Brexit vote.

The yield on another UK gilt maturing in August 2017 also turned negative.

They join other countries such as Japan, Germany, France and Switzerland whose bonds trade in this unprecedented zone.

His comments also sent the pound down as much as one per cent against the euro, to €1.1941, and 1.1 per cent against the dollar, to $1.3280, before beginning to edge up.

Carney said earlier today: “In my view, and I am not pre-judging the views of the other independent MPC members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer.”

Read more: "Significant chance" of negative interest rates in UK

He continued: "The BoE has a plan to achieve our objectives, and by doing so support growth, jobs and wages during a time of considerable uncertainty."

"Part of that plan is ruthless truth telling. And one uncomfortable truth that there are limits to what the Bank of England can do," Carney warned.

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