FX.co ★ UK 10Y Gilt Yield Hits Five-Month High

The yield on the UK 10-year gilt rose above 4.6%, its highest level since mid-October, as investors increasingly priced in a Bank of England rate hike this year amid mounting energy costs driven by the conflict in the Middle East, which threatens to push inflation higher. Oil prices extended their rally after Iran stepped up attacks on oil and transportation infrastructure across the region. At the same time, the International Energy Agency’s plan to release 400 million barrels from strategic reserves offered little immediate relief, as the additional supply could take weeks or even months to reach the market. Money markets now assign a probability of more than 50% to a 25-basis-point rate increase by the Bank of England in December, a sharp shift from expectations of no change as recently as last Wednesday. Investors are also closely watching upcoming UK economic releases, particularly the monthly GDP data due on Friday.