FX.co ★ UK 10-Year Gilt Yields Dip on Monday

UK 10-year gilt yields declined toward 4.75%, tracking falls in US Treasury yields and crude oil prices. Although shipping conditions in the Strait of Hormuz remain volatile and near-term oil supply is uncertain, structural supply is expected to increase following OPEC+’s decision to raise production.

On monetary policy, Bank of England Governor Andrew Bailey adopted a cautious tone last week, highlighting signs of a slowing UK economy and stressing that the BoE would not respond hastily to higher oil prices. He reiterated that inflation is still expected to return to the 2% target, albeit later than previously projected, and he effectively ruled out any imminent rate cuts.

In the US, Fed Chair Kevin Warsh acknowledged that inflation expectations have eased but reaffirmed the Federal Reserve’s commitment to its 2% inflation target. Recent US labor market data showed a gain of just 57,000 jobs last month, while the unemployment rate declined to 4.2% as more workers exited the labor force.