FX.co ★ UK 10-Year Gilt Yield Falls to 10-Week Low

The yield on the UK 10-year government bond decreased to 4.535%, marking a ten-week low, as investors anticipate that the Bank of England might reduce interest rates sooner than previously thought, based on softer economic data and dovish comments from Governor Andrew Bailey. Recent data revealed that the UK's economy expanded by 0.1% in August after a 0.1% contraction in July, aligning with expectations and hinting at modest growth in the third quarter—a slight reprieve for Chancellor Rachel Reeves as she prepares for the challenging budget announcement on November 26. Governor Bailey noted that the economy is performing "below potential" and cautioned about a weakening labor market, with unemployment climbing to 4.8%, its highest level since May 2021. His statements have bolstered predictions of a 25-basis-point interest rate cut by February, with another expected by the third quarter of the following year. Nevertheless, Bailey emphasized the existing tension between persistent inflation pressures and a weakening employment landscape, indicating uncertainty regarding the speed of policy easing. Meanwhile, investors are keenly observing Reeves’s upcoming budget, anticipated to incorporate spending reductions and tax increases as part of efforts to restore fiscal stability.