UK 10Y Bond Yield Hits 14-month Low

The UK 10-year gilt yield rose to 4.92% on Monday, recovering from a 3-basis-point decline on Friday and remaining above the three-week low of 4.891% reached on August 4. The move came as optimism over a potential US-Iran agreement to reopen the Strait of Hormuz faded after Iran denied holding direct talks with Washington on the issue. An agreement between Iran and Oman to restore shipping through the waterway has yet to materialise, while renewed Houthi attacks added to regional tensions. Meanwhile, weaker-than-expected US jobs data reduced expectations of further Federal Reserve rate hikes. In the UK, the Bank of England left rates unchanged in July, with Governor Andrew Bailey saying disinflation remained on track. The latest KPMG/REC survey showed signs of improvement in the UK labour market, with permanent hiring stabilising and temporary vacancies rising. However, starting salary growth accelerated to a six-month high, potentially complicating the BoE’s policy outlook.

The UK 10-year gilt yield held near 4.95% on Friday, remaining above Tuesday’s three-week low of 4.891%, as higher oil prices revived concerns that central banks may need to keep interest rates elevated. Brent crude extended its gains for a second session amid supply concerns after Iran published a restrictive draft plan for the Strait of Hormuz. Although Iran and Oman are reportedly working on an agreement to establish transit routes through the waterway, no deal has yet been announced, keeping investors cautious. Despite the recent rise in yields, the UK 10-year yield remains around 9 basis points lower this week, supported by hopes that a reopening of the strait could eventually ease oil prices and inflation expectations. Meanwhile, the Bank of England left interest rates unchanged in July, with Governor Andrew Bailey saying the disinflation process remained on track despite ongoing external risks.

The UK 10-year gilt yield held near 4.90%, down more than 10 basis points this week as easing energy prices reduced expectations of further monetary tightening. Sentiment improved after Iran announced an agreement with Oman on a proposed shipping route through the Strait of Hormuz, raising hopes that energy flows through the critical waterway could resume. However, a broader US-Iran deal remains uncertain, with President Donald Trump saying he would “see what happens” in ongoing negotiations. Lower oil prices have eased concerns over inflation and weaker economic growth, reinforcing expectations that the Bank of England will maintain a gradual approach to policy tightening. That view was strengthened by last week’s Bank of England meeting, where Governor Andrew Bailey downplayed the need for further rate hikes, arguing that the disinflation process remains on track despite persistent geopolitical uncertainty.