FX.co ★ UK Gilt Yields Ease

The yield on the UK 10-year gilt has declined to 4.45% following a recent spike, indicating that Chancellor Rachel Reeves' budget may have effectively alleviated the pressure on gilts, commonly referred to as the "doom-loop." Investors are optimistic that yields could potentially rise by approximately one percentage point without compromising market stability. Additionally, the deflationary measures introduced in the budget might set the stage for further rate cuts by the Bank of England. Earlier in the week, sovereign yields experienced a global uptick, spearheaded by movements in Japan. This was in response to Bank of Japan Governor Kazuo Ueda's comments about evaluating the necessity of a rate hike during their forthcoming meeting. In the UK, it is largely anticipated that the Bank of England will reduce rates by 25 basis points in December, followed by a pause due to concerns over possible inflation resurgence. Concurrently, the US markets have fully priced in a third rate cut by the Federal Reserve this December, with expectations of at least two additional reductions by 2026, underscoring the varied monetary policy paths among major global economies.