UK Gilt Yields Remain Near 19-Year Highs

UK 10-year gilt yields remained close to 19-year highs, hovering below 5.4%, as persistent inflation concerns and a more hawkish Bank of England stance continued to weigh on bonds. The government also paid its highest 10-year borrowing cost since 1999, selling £4.25 billion of 4.875% bonds maturing in July 2036 at an average yield of 5.383%, as investors demanded higher premiums amid inflation risks and expectations of increased government spending in next month’s budget. On the monetary policy front, BoE Deputy Governor Dave Ramsden said on Monday he would support rate hikes if inflationary pressures persist, echoing recent warnings from Governor Andrew Bailey. The MPC recently voted to hold rates at 3.75%, while warning inflation could peak around 4%. Markets are now pricing in a near 80% probability of a 25bp rate hike in November, with roughly four increases priced in by the middle of next year.