Investing.com — British government bond yields fell to their lowest levels since April 17 on Thursday as investors reduced expectations for Bank of England interest rate increases.
Two-year gilt yields dropped 4 basis points to 4.103% at 1407 GMT, while five-year yields declined nearly 2 basis points to 4.238%. Ten-year gilt yields remained near the three-month low of 4.6755% reached on Wednesday.
“Today’s moves in US and UK bonds show that markets are still being pulled between two forces: easing energy-price pressure on one side, and uncertainty over inflation and central bank policy on the other,” said Des Cooney, Financial Consultant and Retirement Planning Specialist at Axis Financial Consultants. “Lower oil prices have taken some of the immediate heat out of inflation expectations, which has helped gilts in particular, but investors are not yet ready to call the all-clear.”
Financial markets now do not fully price in a quarter-point Bank of England rate increase until March 2027. The probability of a rate move by December 2026 stands at approximately 80%.
The movements in short-dated gilt yields aligned with those of U.S. and German bonds. Longer-dated gilts underperformed by 2 to 3 basis points compared to their international counterparts.
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