UK Gilt Yields Slightly Up on Rate Hike Bets, Political Uncertainty

UK 10-year gilt yields rose back above 4.9%, following US Treasury yields higher after stronger-than-expected US jobs data reinforced expectations of tighter Federal Reserve monetary policy. Nonfarm payrolls surged by 172,000 in May, easily exceeding the expected 85,000, leading markets to fully price in a Fed rate hike by year-end. Investors also processed political developments as Greater Manchester Mayor Andy Burnham announced his intention to challenge Keir Starmer for the UK prime minister role, marking the first time he has confirmed such ambitions. Starmer responded by stating he would not step down. Burnham’s leadership bid hinges on winning the June 18 Makerfield by-election, which would secure him a parliamentary seat and eligibility to contest the leadership. On monetary policy, markets anticipate nearly two Bank of England rate hikes this year, with the first likely in September.

UK 10-year gilt yields stayed below 4.9% after oil prices fell and investors adopted a cautious stance, awaiting progress in Middle East peace efforts. Concerns linger over US-Iran negotiations, particularly Iran’s enriched uranium program and the fragile Lebanon ceasefire, though some investors hope for broader de-escalation in the US-Israeli conflict with Iran. Domestically, Greater Manchester Mayor Andy Burnham announced his intention to challenge Keir Starmer for the UK prime minister role, the first time he has confirmed such ambitions. Starmer responded by stating he would not step down. Burnham’s bid depends on winning the June 18 Makerfield by-election, which would secure him a parliamentary seat and eligibility to contest the leadership. On monetary policy, markets expect nearly two Bank of England rate hikes this year, with the first likely in September, as policymakers balance rising inflation against early signs of a cooling labor market.

UK 10-year gilt yields edged down below 4.9%, following a drop in oil prices and a cautious stance from investors, who are awaiting developments in Middle East peace efforts. Israel and Lebanon reached a ceasefire agreement to halt hostilities, fueling optimism for a wider de-escalation in the US-Israeli conflict with Iran. Yet, Tehran dismissed reports of progress in negotiations with Washington over a temporary peace accord, and clashes persisted in Lebanon. In a rare defiance of President Trump’s administration, the Republican-led US House voted to end military operations against Iran. On monetary policy, markets are pricing in nearly two Bank of England interest rate hikes this year, with the first increase widely expected in September, as policymakers face the dual challenge of curbing rising inflation while addressing early signs of a cooling labor market.