There was a strong rally in global bond markets on Thursday after the Bank of England held interest rates at record lows, surprising investors who had spent the past few weeks positioning for a shift towards tighter monetary policy from big central banks.
The move came the day after the Federal Reserve confirmed its long-telegraphed intention to shrink its $120bn-a-month bond purchases by $15bn a month but took a patient stance on future rate rises.
The BoE confounded market expectations of a rate rise, which had ratcheted up following a series of hawkish public statements from policymakers. Governor Andrew Bailey said last month that the central bank would “have to act” if inflation proved stubbornly high. UK government debt rallied sharply, erasing part of its heavy losses over recent weeks, while the pound tumbled 1.4 per cent against the dollar to $1.34.