UK 10-Year Gilt Yields Dip on Monday

UK 10-year gilt yields fell toward 4.75%, following declines in US Treasury yields and crude prices. While Strait of Hormuz shipping remains volatile and short-term oil supply uncertain, structural oil supply is set to rise after OPEC+’s production increase. On monetary policy, Bank of England Governor Andrew Bailey struck a cautious note last week, citing a slowing UK economy and stating the BoE would not act hastily in response to rising oil prices. He confirmed inflation remains on track for 2%, albeit later than previously expected, and ruled out near-term rate cuts. Meanwhile, Fed Chair Kevin Warsh acknowledged easing inflation expectations but reaffirmed the Fed’s 2% target. US jobs data revealed only 57,000 jobs added last month, with unemployment falling to 4.2% as workers left the labor force.

UK 10-year gilt yields hovered just below 4.8% as the Bank of England’s dovish stance and weaker-than-expected US jobs data led investors to scale back rate hike expectations for both the UK and US. Despite this, yields rose 6 basis points for the week as traders adjusted positions after the initial drop following the US-Iran deal, with additional upward pressure from rising long-term yields in Japan amid concerns over increased spending. On monetary policy, Bank of England Governor Andrew Bailey maintained a cautious tone, highlighting a slowing UK economy and stating the BoE would not rush to respond to rising oil prices. He noted inflation remains on track to reach 2%, though later than previously expected, while ruling out near-term rate cuts. Meanwhile, Fed Chair Kevin Warsh noted easing inflation expectations but reaffirmed the Fed’s 2% target. US jobs data showed only 57,000 jobs added last month, with unemployment falling to 4.2% as workers left the labor force.

UK 10-year gilt yields fell back below 4.8% as weaker-than-expected US jobs data prompted investors to scale back expectations for further Federal Reserve rate hikes. The US economy added just 57,000 jobs last month, well below forecasts, while the unemployment rate unexpectedly fell to 4.2% as many people left the labor force. Investors also assessed remarks from central bankers at the ECB's Sintra Forum. Bank of England Governor Andrew Bailey maintained a dovish tone, pointing to a slowing UK economy while stressing that persistent inflation risks rule out near-term rate cuts. Meanwhile, Fed Chair Kevin Warsh said inflation expectations had eased in recent weeks but reaffirmed the Fed's commitment to returning inflation to its 2% target. Elsewhere, improving prospects for indirect US-Iran talks, with Qatar expected to schedule the next round soon, helped push oil prices lower as shipping through the Strait of Hormuz remained largely uninterrupted.