FX.co ★ UK 10-Year Gilt Yield Lowest since 2024

The yield on the UK's 10-year government bonds has decreased to approximately 4.34%, marking its lowest point since December 2024. This drop is attributed to the combination of cooling inflation rates and heightened confidence in the country's public finances, enhancing the attractiveness of these bonds. Recent statistics indicate a more rapid slowdown in UK inflation than anticipated, with the Consumer Price Index (CPI) falling to 3.2% in November from 3.6%. This development strengthens the anticipations of a potential interest rate cut by the Bank of England from the present 3.75%. Although inflation is still above the central bank’s 2% target, the pace of its reduction has reassured investors. Additionally, fiscal concerns have been alleviated as the government has expanded its budgetary leeway and indicated a more viable trajectory for deficits. Furthermore, the Debt Management Office is adjusting its strategy by issuing fewer long-dated bonds and increasing the issuance of short-term debt, thereby reducing the pressure on long-term bond supply.