FX.co ★ UK 10-Year Gilt Yield Hovers Above 3-Week Low

The UK 10-year gilt yield hovered around 4.95% on Friday, holding above Tuesday’s three-week low of 4.891%, as rising oil prices reignited worries that central banks may have to keep interest rates higher for longer. Brent crude extended gains for a second consecutive session on the back of supply concerns after Iran published a restrictive draft plan for the Strait of Hormuz.

While Iran and Oman are reportedly negotiating an agreement to secure transit routes through the waterway, no deal has been finalized, leaving investors cautious. Even with the recent uptick in yields, the UK 10-year remains roughly 9 basis points lower on the week, supported by expectations that a reopening of the strait could ultimately relieve upward pressure on oil prices and inflation expectations.

At the same time, the Bank of England kept interest rates unchanged at its July meeting. Governor Andrew Bailey reiterated that the disinflation process remains on track, despite persistent external risks.