Bank of England Governor Mark Carney spoke publicly last week about the recent froth in the UK housing market and the BOE’s intentions to tighten monetary policy in hopes of avoiding a housing bubble. Similar to the Federal Reserve, the BOE implemented a series of easy money policies over the past few years that ignited a sharp increase in both credit availability and housing prices. Now, with gross mortgage lending up 36% from April 2013 and an average first time home buyer mortgage balance-to-gross income ratio of 3.83 times (versus 3.6 times in 2007), British policymakers are growing uneasy. To combat this, Mr. Carney hinted that an increase in interest rates could be on the horizon, which caused a rise in British rates, particularly in the 5-7 year portion of the yield curve. While the situation in the U.S. is certainly not the same as the UK, there are some similarities, particularly the fact that both economies are performing more in-line with central bank long-run targets. Should the U.S. economy and employment situation continue to improve and inflation continue to rise, we expect the Fed to hint at similar actions as the BOE. We have positioned our portfolios for such an event by being underweight the 5-7 year part of the curve as well as overall portfolio duration, which, as investors in Gilts are showing us, is the right place to be.