UK 10-Year Gilt Yield Pulls Back from 10-Week High

The UK 10-year gilt yield fell to around 4.505%, moving further away from the ten-week high of 4.5527% on January 28, as markets await the Bank of England policy meeting this week. Investors are positioned for the BoE to hold rates at 3.75% on Thursday, with officials expected to offer limited guidance on the timing of future cuts while inflation remains elevated. December inflation at 3.4%, the highest in the G7, and persistent concerns over underlying price pressures have led markets to scale back easing bets. Traders now price almost no chance of a cut this week and less than a 50% probability of more than one cut this year, compared with expectations for two cuts in mid-January. Recent UK data has been resilient, including an improvement in manufacturing PMI and steady economic momentum, supporting the view that the BoE can stay cautious.

The UK 10-year gilt yield stabilized just above 4.5%, close to its highest level since November 20, as markets anticipate that both the Bank of England and the Federal Reserve will likely keep rates on hold for the foreseeable future. In the UK, fresh BRC data showed accelerating price pressures, reinforcing concerns over sticky inflation and potentially limiting the Bank of England’s room to cut interest rates in the near term. However, a recent rally in the UK pound, driven by broad dollar weakness, may help ease imported inflation pressures and support inflation expectations, potentially offsetting some of the upward pressure from domestic price growth. Meanwhile, the Federal Reserve left interest rates unchanged, in line with expectations. Chair Jerome Powell indicated that the central bank is likely to maintain its current stance for some time, citing signs of stabilizing unemployment and inflation that remains somewhat elevated.

UK 10 Year Government Bond Yield increased to 4.55%, the highest since December 2025. Over the past 4 weeks, United Kingdom 10Y Bond Yield gained 5.47 basis points, and in the last 12 months, it decreased 8.51 basis points.