UK Gilt Yields Ease as Rate Hike Bets Shift to 2027
UK gilt yields have eased off as investors reassess the likelihood of interest rate hikes by the Bank of England. The 10-year gilt yield has fallen to around 5% at the end of August, close to its two-week low of 4.943% reached on Wednesday.
The decline in Brent crude prices has helped to ease inflation concerns, pushing expectations for a rate hike into 2027 from late 2026. According to LSEG data, only around 24 basis points of tightening are priced in by December and 36 bps by the February 2027 meeting.
Meanwhile, UK inflation rose to 2.9% in July, driven by higher household energy bills, and is expected to increase further toward year-end. The labour market remains subdued, with investors now awaiting Fed Chair Kevin Warsh's speech at Jackson Hole on Friday.