UK 10-year gilt yields climbed back above 5.3% as oil prices rebounded and investors digested preliminary September PMI figures. Brent crude recovered after five straight sessions of losses, with uncertainty over US–Iran negotiations lingering: President Trump threatened further action against Iran while also indicating that a deal could be reached soon.
The latest PMI survey showed UK business activity continued to grow in September, though at a slightly slower pace than before and below market forecasts. Despite the softer reading, markets are still assigning a significant probability to a 25-basis-point Bank of England rate increase in November.
In the US, much stronger-than-expected PMI data signalled the sharpest expansion in business activity in more than five years. Coupled with a wave of hawkish comments from Federal Reserve officials, this bolstered expectations of further monetary tightening, coming on the heels of the Fed’s first rate hike since 2023, delivered last week.
