UK Gilt Yields Ease but Remain Near Multi-Year Highs

The UK 10-year gilt yield edged down to 5.43% but remained close to multi-year highs, as stronger-than-expected labor market data reinforced expectations of a Bank of England rate hike next month. The unemployment rate unexpectedly fell to 4.7% in the three months to August, its lowest level since July 2025, while regular wage growth accelerated to 3.7%, slightly above forecasts of 3.6%. The data followed a series of stronger-than-expected releases last week, with the economy expanding 0.1% in August and the trade deficit narrowing unexpectedly, suggesting greater economic resilience than previously anticipated. Meanwhile, some major investors expect fiscal discipline to feature prominently in next week’s budget, helping support demand for gilts. Since Andy Burnham became prime minister, UK gilt yields have risen less than those in several other major bond markets, reflecting comparatively stronger investor confidence in the UK’s fiscal outlook.