Danny Walker, Dong Lou, Gabor Pinter and Semih Üslü
Government bond yields tend to drift higher in the days before monetary policy or data news in the UK. Over the past two decades this tendency – which we label ‘pre-news drift’ – has pushed up on yields by 2 percentage points in total over that period. The drift concentrates in pre-news periods that coincide with the issuance of UK government bonds, which is more common than it used to be. Our analysis shows that dealers and hedge funds are reluctant to buy bonds when news is on its way, which pushes up yields. Pre-news drift could affect the signal monetary policy makers draw from market rates and it could have implications for the optimal timing of bond issuance. There are further details in an associated working paper.
