Gilts Hold Near 5 Per Cent as Markets Eye the Bank of England
The cooler inflation print offered only limited comfort to bond markets, where British borrowing costs remain the highest in the G7. Ten-year gilt yields are holding around 5 per cent and the pound has slipped below $1.34 to a one-week low, after the Prime Minister’s remarks about fiscal “flexibility” rattled investors on Monday. Attention now turns to the Bank of England’s rate decision on 30 July, where a hold is expected.
Yields spiked on Monday, with the ten-year rising above 5 per cent and the thirty-year to a two-month high, before steadying once Mr Healey’s appointment as Chancellor calmed nerves. Softer inflation nudges the argument that the Bank may eventually have room to ease, but core and services inflation stayed sticky and policymakers have flagged a likely re-acceleration towards 3 per cent over the summer as the energy-bill rise and the oil spike feed through. The scars of the 2022 mini-budget and Britain’s high public debt continue to keep a premium on UK borrowing. Watch whether the new government’s spending plans steady or unsettle the market into the autumn.