UK Interest Rate Hike Imminent as Global Bond Market Rout Deepens

The Bank of England is facing pressure to raise interest rates due to the global bond market rout caused by concerns over government borrowing and inflation. Investors are urging the bank to act quickly, warning that failing to do so would risk losing credibility. The UK's sovereign debt has been offloaded more aggressively than other major economies, with long-dated and short-dated securities dumped by traders.

The 30-year gilt yield neared six per cent on Tuesday, its highest level since 1997, while shorter-term gilt prices suggest the Bank will hike rates as many as four times in the next 12 months. Anthony Brinkman, high yield portfolio manager at Principle Asset Management, said investors would continue to charge a higher price for holding government debt if the bank doesn't hike and fails to communicate its long-term trajectory.

The energy market has reignited fears that businesses will pass on their higher costs to consumers, pushing up prices across the economy despite slack in Britain's labour market. Andrew Wishart, senior UK economist at Berenberg, warned the Bank of England it 'must deliver' on previous promises to raise interest rates or risk losing credibility and sparking a sell-off in the pound.