FX.co ★ UK Gilt Yields Ease Amid Political Transition

UK 10-year gilt yields declined to 4.71%, approaching a two-month low, as bond markets remained steady while investors awaited the appointment of a new Treasury chief to succeed Rachel Reeves. Markets largely looked beyond immediate fiscal risks associated with a likely Andy Burnham premiership, focusing instead on how the new Chancellor will shape future fiscal and economic policy. Burnham, the sole candidate to replace Keir Starmer, pledged on Monday to significantly devolve fiscal powers from Westminster to local authorities if elected, while maintaining fiscal discipline. Gilt yields were on track for a 9 bps decline for the month and a 14 bps fall for the quarter, as investors evaluated the impact of the interim US–Iran peace agreement and evolving interest rate expectations in both the UK and US. The reopening of the Strait of Hormuz has eased oil prices and reduced inflation concerns, diminishing expectations of further Bank of England rate hikes, while the US Federal Reserve’s hawkish stance continues to underpin forecasts of additional US rate increases.