UK 10-Year Gilt Yield Eases After 2007 High
UK 10-year gilt yields eased to around 5.4% after touching their highest level since July 2007, as the recent rise in oil prices paused and investors took a breather following a sharp sell-off. Gilt yields remain elevated, as higher energy costs heightened inflation concerns and stronger-than-expected economic growth reinforced expectations for interest rates to remain higher for longer. Several Bank of England policymakers, including Governor Andrew Bailey and MPC members who voted to hold rates last month, have signaled greater openness to a rate hike as rising energy prices increase the risk of inflation remaining above target. Markets are now pricing in the possibility of the Bank beginning to tighten monetary policy as early as November, with data indicating that investors expect four rate hikes by July 2027. Higher borrowing costs pose an additional challenge for the government as it seeks to ease cost-of-living pressures ahead of the October 28 budget.
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4% after touching their highest level since July 2007, as the recent rise in oil prices paused and investors took a breather following a sharp sell-off. Gilt yields remain elevated, as higher energy costs heightened inflation concerns and stronger-than-expected economic growth reinforced expectations for interest rates to remain higher for longer. Several Bank of England policymakers, including Governor Andrew Bailey and MPC members who voted to hold rates last month, have signaled greater openness to a rate hike as rising energy prices increase the risk of inflation remaining above target.
Markets are now pricing in the possibility of the Bank beginning to tighten monetary policy as early as November, with data indicating that investors expect four rate hikes by July 2027. Higher borrowing costs pose an additional challenge for the government as it seeks to ease cost-of-living pressures ahead of the October 28 budget.