UK Gilt Yields Rise as Oil Fuels Rate-Hike Bets

2026-10-07 08:55 By Joana Ferreira 1 min. read

UK 10-year gilt yields climbed back above 5.4%, returning to levels not seen since July 2007, as oil prices rebounded and inflation concerns intensified, reinforcing expectations of further interest-rate hikes from major central banks.

Brent crude rose above $100 a barrel amid persistent risks to Middle East energy flows, following reports that Iran had intensified attacks on tankers in the Strait of Hormuz in recent days.

UK swaps now price in over 100 basis points of Bank of England rate increases by the end of next year.

Expectations for the ECB and Federal Reserve have also edged higher, with traders pricing roughly 75 basis points and 85 basis points of hikes over the same period, respectively.

Meanwhile, the UK’s party conference season wraps up today, with the budget now just three weeks away.

Chancellor John Healey has set Oct. 28 for the fiscal statement, a month earlier than last year, in an effort to limit the time available for policy speculation.



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UK Gilt Yields Rise as Oil Fuels Rate-Hike Bets
UK 10-year gilt yields climbed back above 5.4%, returning to levels not seen since July 2007, as oil prices rebounded and inflation concerns intensified, reinforcing expectations of further interest-rate hikes from major central banks. Brent crude rose above $100 a barrel amid persistent risks to Middle East energy flows, following reports that Iran had intensified attacks on tankers in the Strait of Hormuz in recent days. UK swaps now price in over 100 basis points of Bank of England rate increases by the end of next year. Expectations for the ECB and Federal Reserve have also edged higher, with traders pricing roughly 75 basis points and 85 basis points of hikes over the same period, respectively. Meanwhile, the UK’s party conference season wraps up today, with the budget now just three weeks away. Chancellor John Healey has set Oct. 28 for the fiscal statement, a month earlier than last year, in an effort to limit the time available for policy speculation.
2026-10-07
UK Gilt Yields Ease From Recent Highs
UK 10-year gilt yields eased to 5.35% after reaching their highest level since July 2007 last week, helped by lower oil prices and a pause following the recent sharp sell-off. Yields remain elevated, however, as high energy costs have fueled inflation concerns and stronger-than-expected economic growth reinforced expectations for interest rates to stay higher for longer. BoE policymaker Catherine Mann said on Tuesday that inflation above the Bank’s 2% target appeared to have become embedded in the economy. She warned that inflation could reach 4% around the turn of the year, when wage negotiations typically take place, potentially further entrenching price pressures. On the data front, UK construction activity continued to contract in September, although at a slower pace than expected. Builders also became less optimistic about the outlook, delaying major projects as higher rates, inflation and weak orders weighed on growth expectations.
2026-10-06
UK 10-Year Gilt Yield Eases After 2007 High
UK 10-year gilt yields eased below 5.4% after touching their highest level since July 2007, as the recent rise in oil prices paused and investors took a breather following a sharp sell-off. Gilt yields remain elevated, as higher energy costs heightened inflation concerns and stronger-than-expected economic growth reinforced expectations for interest rates to remain higher for longer. Several Bank of England policymakers, including Governor Andrew Bailey and MPC members who voted to hold rates last month, have signaled greater openness to a rate hike as rising energy prices increase the risk of inflation remaining above target. Markets are pricing around 30 basis points of Bank of England tightening by year-end and roughly 90 bps by the end of 2027. Higher borrowing costs pose an additional challenge for the government as it seeks to ease cost-of-living pressures ahead of the October 28 budget.
2026-10-02