UK Gilt Yields Hold Firm Above 5% Amid Ongoing Inflation Risks

UK government bond yields have remained above 5% as investors continue to weigh inflationary risks, including rising oil prices and potential fuel supply disruptions.

The price of oil has surpassed $90 per barrel, contributing to concerns about persistent inflation. Low Eurozone gas inventories and the prospect of a prolonged Iran conflict further exacerbate these pressures.

Markets are awaiting details on Iran sanctions from US Treasury Secretary Scott Bessent later today, while Fed Chair Kevin Warsh's remarks at Jackson Hole this Friday may provide insight into the interest-rate outlook.

In the UK, money markets still price in a Bank of England rate hike by year-end and another 25-basis-point increase expected by early 2027.