FX.co ★ Long-Dated Gilt Yields Pull Back

The yield on the 10-year Gilt has edged closer to the 4.5% threshold, continuing its pullback from the near three-month high of 4.8% recorded on April 10th. This movement can be attributed to a downward revision in bond supply and a macroeconomic environment that supports lower interest rates from the Bank of England. Notably, the UK's Debt Management Office has reduced the issuance of new long-dated bonds to £29.8 billion, down from the initially planned £40 billion, thereby decreasing the proportion of longer maturities in total sales to 10%. This decision has amplified the effect of the Bank of England's choice to suspend long-Gilt sales this month as part of its quantitative tightening strategy, following increased government borrowing and the decreasing value of US Treasuries, which have both driven up domestic yields. Simultaneously, PMI data has indicated an unexpected contraction in private sector activity for the first time in a year and a half, as tariffs from the United States have already disrupted British supply chains. Additionally, the latest inflation figures were weaker than anticipated, suggesting the Bank of England may have further scope to continue reducing rates this year.