UK 10-year gilt yields declined toward 5.1%, their lowest level since late August, as a broader flight to safety boosted demand for government bonds. Investors rotated out of technology stocks, intensifying the sell-off in chipmakers and hyperscalers on concerns that a Democratic sweep in the US midterm elections could open the door to stricter AI regulation and slow the pace of infrastructure investment.
At the same time, markets continued to digest the implications of the Bank of England’s policy decision on Thursday. The BoE raised interest rates for the first time in more than three years, with Governor Andrew Bailey indicating that further tightening may be required unless the conflict in Iran is resolved. As a result, markets have reinforced expectations of additional monetary tightening, with three more rate hikes now fully priced in by November 2027.
The BoE also cautioned that inflation could peak at 4.9% in Q2 2027, while its adverse scenario projects a steeper increase to 6.2% in Q3.
