BoE Rate Hike Odds Still Uncertain as Bond Yields Slowly Decline

Market expectations for a quarter-point interest rate increase from the Bank of England have yet to fully account for the move, as bond yields resumed their slow descent following a brief uptick on Wednesday.

According to LSEG data, investors priced in 24.3 basis points of rate increases ahead of the BoE's December 17 announcement, down from more than 25 basis points seen for much of August. The market is anticipating 36 basis points of tightening by the February 4 decision.

For the BoE's September 17 session, under 4 basis points of tightening are priced in, suggesting only a 15% probability of a move, compared to 24 basis points for the European Central Bank's September 10 meeting.

The yields on British 10-year government bonds slipped 2 basis points on Thursday to 5.01%, hovering near the two-week low of 4.979% reached on Wednesday before an afternoon rise.