“As soon as those shipping lanes are agreed, you should see oil prices drop and then you’ll start seeing wholesale funding dropping,” he said. “As soon as there is any deal done, you’ll suddenly see oil prices drop through the floor, swap prices drop through the floor, the Bank of England can start feeling comfortable that this so-called fuel crisis is over, and they will start cutting rates again, as they very publicly said.”
He believes the US is also signalling urgency on the Ukraine conflict, pointing to CIA director John Ratcliffe’s unannounced flight to Moscow last week as evidence President Donald Trump is pushing to bring multiple flashpoints to a close before November’s midterm elections. “They made it very public that they sent the head of the CIA to Russia to, in essence, try and bring matters to a close,” Murphy said. “Trump’s administration is saying we’ve got to bring these matters to a close, and they’re being very public about it.”
What the bond market is really telling brokers
Murphy was speaking as some calm returned to the gilt market on Thursday, with the 10-year yield pulling back 10 basis points to 5.13%, retreating from an 18-year high set the previous day. But he is clear the partial recovery does not change the underlying picture for fixed-rate borrowers.
“Sadly, what it means for mortgage borrowers at this moment in time is that fixed rates will stay high,” he said. “The base rate’s unlikely to go anywhere. There’s still a very small chance of it going up.”
The disconnect between the Bank Rate and fixed-rate pricing has widened sharply this year. Murphy noted that fixed rates at the same loan-to-value were around 3.7% in February, while they now sit closer to 4.7% – a near-one percentage point shift driven entirely by rising swap rates, not by any move in the Bank Rate, which has been held at 3.75% since last December. He placed the bond market volatility in a wider global context, describing it as markets forcing governments to confront unsustainable debt levels. “If you look at someone like Japan, they’re three times over their agreed debt target. The US is double. It’s insane.”