UK Gilt Yields Jump as BOE Rate Cut Expectations Slide

2026-03-03 13:19 By Joana Ferreira 1 min. read

The UK 10-year gilt yield surged to 4.5%, up 20 bps on the day, as markets scaled back expectations of a Bank of England rate cut in March amid ongoing inflation concerns.

The two-year gilt rose above the 3.8% mark, its highest since December 29 and on track for its biggest daily jump since April 2025.

Rising oil and gas prices driven by the Middle East conflict have heightened the risk of global inflation, prompting investors to reassess rate-cut prospects across major central banks.

Markets now price only a 20% chance of a BOE cut this month, down sharply from 75% last week.

Investors also absorbed Chancellor Rachel Reeves’ downgraded growth forecasts.

The Office for Budget Responsibility (OBR) cut UK growth for 2026 to 1.1%, from 1.4% in November, before accounting for potential energy shocks.

Growth projections for 2027 and 2028 were raised to 1.6% in both years, while the OBR also forecast lower borrowing and subdued inflation.



News Stream
UK Gilt Yields Jump as BOE Rate Cut Expectations Slide
The UK 10-year gilt yield surged to 4.5%, up 20 bps on the day, as markets scaled back expectations of a Bank of England rate cut in March amid ongoing inflation concerns. The two-year gilt rose above the 3.8% mark, its highest since December 29 and on track for its biggest daily jump since April 2025. Rising oil and gas prices driven by the Middle East conflict have heightened the risk of global inflation, prompting investors to reassess rate-cut prospects across major central banks. Markets now price only a 20% chance of a BOE cut this month, down sharply from 75% last week. Investors also absorbed Chancellor Rachel Reeves’ downgraded growth forecasts. The Office for Budget Responsibility (OBR) cut UK growth for 2026 to 1.1%, from 1.4% in November, before accounting for potential energy shocks. Growth projections for 2027 and 2028 were raised to 1.6% in both years, while the OBR also forecast lower borrowing and subdued inflation.
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UK 10-Year Gilt Yield Jumps Amid Middle East Tensions
The UK 10-year gilt yield surged to 4.4%, its highest level since February 13, as escalating Middle East tensions unsettled global markets and led traders to scale back expectations for near-term interest rate cuts by major central banks amid renewed inflation concerns. Natural gas and crude oil prices jumped following the formal closure of the Strait of Hormuz and the ongoing suspension of Qatari LNG exports, heightening the risk of prolonged energy-driven inflation and likely pushing the Bank of England toward a more hawkish monetary policy stance to counter rising price pressures. Domestic political uncertainty also weighed on sentiment. Labour’s unexpected loss in Gorton and Denton has fueled speculation over the future of PM Keir Starmer and Chancellor Rachel Reeves, raising concerns that a leadership shift toward ministers favoring higher fiscal spending could put additional pressure on the UK’s public finances.
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The UK 10-year gilt yield rose to 4.30%, rebounding from an over one-year low of 4.229% touched on Friday, as escalating tensions in the Middle East unsettled global markets. Investors have begun trimming their expectations for interest rate cuts by major central banks amid renewed inflation concerns. Over the weekend, the US and Israel launched strikes on Iran, resulting in the reported death of Iran’s Supreme Leader and the effective closure of the Strait of Hormuz. In retaliation, Iran carried out missile and drone attacks across parts of the region, further heightening geopolitical uncertainty. A sharp rise in oil and gas prices has fueled fears of renewed inflationary pressures across Europe. The region is particularly vulnerable, with gas inventories at unusually low levels and substantial replenishment required ahead of next winter, increasing the risk of sustained energy-driven price pressures.
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