UK 10-year gilt yields climbed to 4.8%, extending their rebound from last week’s two-month lows, as investors digested comments from global central bankers at the ECB’s Sintra Forum. Bank of England Governor Andrew Bailey reiterated a dovish stance in an interview with CNBC, noting signs of a cooling UK economy and explaining that the decision to hold rates at 3.75% in May reflected that assessment. He ruled out imminent rate cuts due to lingering inflation risks, while highlighting the positive impact of lower energy prices. Bailey also underscored that the BoE would not overreact to the recent rise in oil prices, maintaining that inflation remains on course to return to the 2% target, albeit later than initially anticipated.
Gilt yields also followed US Treasuries higher after Federal Reserve Chair Kevin Warsh refrained from offering fresh guidance on interest rates, even as markets continued to price in additional Fed hikes this year on the back of robust labor market data. Meanwhile, bond investors assessed the political outlook, weighing the chances of Ed Miliband becoming Chancellor instead of Wes Streeting. Fiscal worries subsided somewhat after Andy Burnham, seen as the frontrunner for prime minister, reaffirmed his commitment to fiscal discipline.