UK Gilt Yields Eased but Remain Near Multi-Decade Highs Amid Inflation Concerns

UK gilt yields eased slightly but remained near multi-decade highs as investors digested key data ahead of next week's policy meetings in the UK and US. The 10-year gilt yield dipped toward 5.3% after the energy price rally paused.

The UK 30-year gilt yield, however, hovered near 6%, a level last seen in 1998. This comes as markets expect four Bank of England (BoE) rate increases by mid-2027 due to elevated oil prices fueling inflation concerns.

UK GDP growth beat forecasts at 0.4% month-on-month in July, while growth over the three months to July also held steady at 0.4%. BoE Governor Andrew Bailey said future decisions would depend on economic and geopolitical developments, pushing back against the view that another hike is inevitable.

Despite this, markets remain fully pricing a rate increase next week, fueled by growing expectations of a Federal Reserve rate hike in the US following stronger-than-expected core inflation data and signs of a resilient labor market.