UK 10-Year Gilt Yields Hit Fresh 18-Year High

UK 10-year gilt yields remained around 5.15%, close to their highest level since July 2008 after a turbulent week that saw a 26-basis-point surge, the largest increase since the first week of the Iran war. The spike reflects mounting political uncertainty and inflationary pressures, as investors assess the potential leadership challenge to Prime Minister Keir Starmer from Andy Burnham, who is seen as the least favorable candidate for bond markets. Inflation concerns have also intensified due to stalled US-Iran negotiations over reopening the Strait of Hormuz, with President Trump expressing growing frustration. Markets now anticipate nearly three Bank of England rate hikes this year, with Chief Economist Huw Pill, who backed the last rate increase, continuing to advocate for further tightening to counter inflation driven by the energy shock tied to the conflict.

UK 10 Year Government Bond Yield increased to 5.19%, the highest since July 2008. Over the past 4 weeks, United Kingdom 10Y Bond Yield gained 35.60 basis points, and in the last 12 months, it increased 52.06 basis points.

UK 10-year gilt yields climbed toward 5.2%, their highest since July 2008, and are on track for a nearly 25-basis-point weekly rise, the largest since the second week after the Middle East conflict began. The surge follows growing political uncertainty after Andy Burnham emerged as a potential challenger to Prime Minister Keir Starmer. Burnham, viewed as the least favorable option for bond investors, secured a path to challenge Starmer after MP Josh Simons stepped aside. Other contenders include Wes Streeting, Ed Miliband, and Angela Rayner, with Rayner sharing a similar risk profile to Burnham. Meanwhile, US President Donald Trump’s remark that “we don’t need the Strait of Hormuz open” pushed crude prices higher. Traders now expect the Bank of England to deliver about 70 basis points of hikes this year. Huw Pill, the BOE’s chief economist, who voted for a rate increase at the last meeting, argued for further hikes to counter inflationary pressures from the war-related energy shock.