Big impact for small central banks shocks global bond investors

When the Bank of England sprang a surprise last week by keeping interest rates on hold, the impact quickly spread beyond UK government bonds. The ensuing rally in the gilt market, as traders unwound their bets on UK rate rises, also jammed yields sharply lower on eurozone bonds and US Treasuries. The episode highlights how a clutch of smaller central banks — most notably the BoE, but also the Bank of Canada and Reserve Bank of Australia — have recently found themselves in the unusual position of dictating moves across the world’s biggest bond markets.

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