The yield on the UK 10-year gilt rose to 4.92% on Monday, rebounding from a 3-basis-point decline on Friday and holding above the three-week low of 4.891% recorded on August 4. The uptick followed fading optimism over a possible US–Iran deal to reopen the Strait of Hormuz, after Tehran denied it was engaged in direct talks with Washington on the matter. A separate agreement between Iran and Oman aimed at restoring shipping flows through the key waterway has yet to materialise, while renewed Houthi attacks have further heightened regional tensions.
At the same time, weaker-than-expected US employment data have tempered expectations of additional interest rate increases by the Federal Reserve. In the UK, the Bank of England left rates unchanged at its July meeting, with Governor Andrew Bailey reiterating that the disinflation process remained on track.
Domestically, the latest KPMG/REC survey indicated early signs of improvement in the UK labour market: permanent staff hiring has stabilised and demand for temporary workers has picked up. However, starting salary growth accelerated to a six-month high, potentially complicating the BoE’s policy outlook by adding to wage-driven inflation pressures.
