FX.co ★ UK 10-Year Gilt Yield Rises to Over 2-Week High

The yield on the UK 10-year government bond has climbed to 4.48%, marking the highest level seen in over two weeks. This movement follows market anticipation of the forthcoming budget and assessment of the Bank of England's recent decision. In a closely split 5–4 vote, the Bank of England opted to maintain interest rates at 4%, with Governor Andrew Bailey casting the decisive vote. Four committee members advocated for a 25 basis point reduction to 3.75%. The central bank indicated that the 3.8% inflation rate recorded in September likely represents the peak, with Bailey suggesting that associated risks have diminished, thereby moving closer to supporting rate cuts. The current guidance suggests that interest rates are expected to decrease gradually. Market expectations point towards a December rate cut, contingent on further developments in the Labour government's budget, as well as additional data on inflation and employment. Traders are pricing in a 60% probability of a 25 basis point adjustment, projecting rates to stabilize around 3.5%. Anticipating the budget release, increased market volatility is expected.