The UK 10-year gilt yield extended its decline to around 5.1%, its lowest level since late August, as Brent crude prices dropped to two-month lows. The move in oil came amid expectations that the Trump administration could face growing political pressure to end the war with Iran following a Democratic sweep in the US midterm elections. Market sentiment was further buoyed by a rotation out of technology stocks and into other asset classes, driven by concerns over possible new regulatory constraints on chipmakers.
At the same time, the Bank of England is widely expected to raise interest rates for the first time since 2023, as persistent inflationary pressures continue to cloud the economic outlook. However, officials are likely to push back against market expectations of additional tightening in the coming year. In this context, forecasts for further rate hikes beyond today’s BoE decision have eased, with traders no longer fully pricing in four increases by the end of next year.
