Weekly Bulletin: Low Interest Rates for a Little While Longer…

Marilyn Watson, head of the BlackRock Global Fundamental Bond Product Strategy Team

“Financial repression has not ended. We expect to see further loosening on the fiscal side in the UK and elsewhere. We’re not going to see interest rates rise anywhere soon in developed markets. With continued low rates, it will still be very hard for investors to get the income they’re looking for.”

“For investors, the solution to this environment is to be targeted and diversified, but also to take as flexible an approach as possible, retaining the ability to protect and hedge portfolios and to be very nimble in terms of changing overall allocation. Investors also need to be realistic about the returns they can achieve.”

“Some of the valuations in fixed income look stretched. Some of the investment grade bonds, for example, are relatively expensive, plus treasuries, government bonds, bunds and gilts. There’s not a bubble that’s going to burst, but it is harder and harder to find genuine sources of value.”

Week Past

European Central Bank (ECB) interest rate decision – The ECB decided unanimously to keep interest rates at their current level of -0.5%, in line with market expectations. The central bank also announced a strategic review into whether its inflation target is still appropriate. [1]

German flash manufacturing and services Purchasing Managers Indices (PMI) (January) – The German economy rebounded at its fastest pace in five months at the start of 2020, suggesting the “storm clouds may be starting to clear”. The composite index rose to 51.1 from 50.2 at the end of 2019. [2]

UK flash manufacturing and services PMI (January) – UK manufacturing and services saw a rebound following the UK General Election. The composite PMI rose to a 16-month high of 52.4, up from 49.3 in December. [3]

US flash manufacturing and services PMI (January) – US manufacturing continued its weakness in January, with the IHS Markit flash PMI falling to 51.7 in January from 52.4 in the previous month. However, services continue to strengthen. [4]

Week Ahead

Brexit – the UK formally leaves the European Union on 31 January, allowing trade negotiations to begin. [5]

Bank of England rate decision and inflation report – Although there has been talk of a potential interest rate cut ahead of Brexit, market expectations now point towards no change. [5]

Federal Reserve rate decision – the Federal Reserve has clearly signalled that rates are on hold at 1.75% in the short-term with many not expecting a rate rise until 2020 and beyond. [5]

US and Eurozone gross domestic product (GDP) – Early readings are expected for US and Eurozone economic growth. The market is expecting US growth to be stable at 2.1%, while Eurozone growth is slated to fall from 1.2% to 1%. [5]

Chinese manufacturing and non-manufacturing PMI (January) – Manufacturing has been expected to rise from 50.2 to 51.1, but data may be disrupted by the Coronavirus outbreak. [6]


  1. ECB holds rates as strategic review gets underway, CNBC, January 2020
  2. German economy picks up pace while Eurozone growth stagnates, City AM, January 2020
  3. UK firms see boost as uncertainty eases, survey says, BBC, January 2020
  4. US manufacturing PMI at 3-month low in January, MarketWatch, January 2020
  5. IG Index, week ahead, January 2020
  6. FX Street, Economic Calendar, January 2020

The opinions expressed are as of February 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.