FX.co ★ UK Gilt Yields Slightly Up on Rate Hike Bets, Political Uncertainty

UK 10-year gilt yields climbed back above 4.9%, tracking a rise in US Treasury yields after stronger-than-expected US employment data reinforced expectations of tighter Federal Reserve policy. Nonfarm payrolls jumped by 172,000 in May, far surpassing the consensus forecast of 85,000, prompting markets to fully price in a Fed rate hike by year-end.

Investors also weighed domestic political developments after Greater Manchester Mayor Andy Burnham confirmed for the first time that he intends to challenge Keir Starmer for the role of UK prime minister. Starmer said he would not step down. Burnham’s leadership ambitions depend on winning the 18 June Makerfield by-election, which would give him a seat in Parliament and make him eligible to contest the leadership.

On UK monetary policy, markets now expect close to two Bank of England rate increases this year, with the first move likely in September.