This prediction could significantly reshape the UK bond market, leaving income portfolios needing to adjust to maximise returns while managing risks.

Whether you’re a seasoned fixed-income investor or new to gilts and corporate bonds, understanding the IMF’s outlook and its strategic implications is critical.

Forecast Rationale

The IMF urges further Boe rate cuts based on slowing UK growth, driven by weak demand and consumer confidence, and decelerating headline inflation, although core inflation stays elevated.

Market-Implied Expectations

While gilts currently price in one or two cuts by end-2024, the IMF forecasts three 25 bp reductions, totalling 75 bp from today’s 5.25%—implying a steeper easing path.

Timing and Magnitude of Rate Cuts

Expect the first 25 bp cut at early-2024 policy meetings, with two more by year-end, a shift that will pivot gilt yields, credit spreads and the broader fixed-income landscape.

Bond-Market Moves

• Extend Duration with Gilts: Focus on 10- and 30-year gilts—or ultra-long 50-year index-linked—for maximum price gains in a rate-cut cycle.
• Add Selective Corporate Credit: Target AA/A-rated utilities and consumer-staples bonds to benefit from spread narrowing and stable cash flows.
• Explore Emerging Green Bonds: Invest in UK green gilts or corporate green bonds to capture both income and ESG-driven demand.

Tactical Tips

• Ride the Yield Curve Steepening: Reallocate from short-dated to 5–10-year gilts as the curve steepens early in the easing cycle.
• Position in Laddered Bond Portfolios: Stagger maturities to balance yield pickup, liquidity and reinvestment risk during rate cuts.

Subscriber Insight

Advisor’s Gateway subscribers receive central-bank calendar alerts and real-time BoE updates—ensuring you know exactly when to act on rate-cut signals.

Cut to the Chase

The IMF’s call for BoE easing brings both challenges and opportunities: early, disciplined positioning in duration, credit and green bonds can maximise returns in the next rate-cut cycle.