(Bloomberg) --Merian Global Investors is buying the pound on bets the U.K. will reach a successful divorce deal with the European Union.

As Brexit negotiators work through the night to reach a deal, the head of fixed income at the $45 billion fund is adding to his long sterling positions, a currency he believes is oversold. He is also shorting U.K. government bonds on bets yields will climb after an agreement is secured.

“We do think it can probably get to an initial relief trade around $1.40,” Mark Nash of Merian Global, said in an interview in Singapore. “The pound is undervalued now because of the Brexit risk.”

The U.K. currency has lost almost 5 percent this year to trade at $1.2875 as investors fretted over Britain’s inability to secure a clear exit plan. It slid as much as 1.1 percent Monday amid speculation Prime Minister Theresa May may have to drop her Brexit plan or face defeat in Parliament.

Brexit negotiators are working very hard to reach a deal, but the final stage of the talks is proving “immensely difficult,” May said in a speech Monday in London.

“If we get some resolution to these political issues, we are going to see gilts sell off,” London-based Nash said. “We do expect at least two interest-rate hikes next year after we get a Brexit deal, potentially another one in quick succession. So naturally that’ll push up U.K. gilt yields.’’

Overnight-index swaps indicate the Bank of England will raise its benchmark rate just once by end of 2019. Nash expects a faster pace of tightening and expects gilts to come under pressure following Britain’s clean break from the EU. He is shorting 10-year bond futures and paying longer-maturity swaps to position for a steeper U.K. rate curve.