FX.co ★ UK Gilt Yields Retreat From Highs but Post Sharp Monthly Rise

The UK’s 10-year gilt yield slipped below 4.85%, retreating from multi-year highs as investors reassessed growth risks stemming from the energy shock linked to the escalating conflict involving Iran. Even with this late-month pullback, yields remained on course to end March about 60 basis points higher, marking one of the sharpest monthly rises among major European government bonds. The geopolitical turmoil has driven energy prices higher and prompted a significant repricing of Bank of England policy expectations. Markets now foresee at least two rate hikes by 2026, a sharp turnaround from earlier forecasts that had pencilled in two cuts. Even so, BoE policymaker Alan Taylor adopted a cautious stance, signalling a “high bar” for further tightening and arguing for keeping borrowing costs steady until the economic fallout from the conflict becomes clearer.