FX.co ★ UK Gilt Yields Ease From Recent Highs

UK 10‑year gilt yields eased to 5.35% after having hit their highest level since July 2007 last week, supported by lower oil prices and a pause following the recent sharp sell-off. Nonetheless, yields remain elevated as high energy costs have stoked inflation concerns and stronger-than-expected economic growth has reinforced expectations that interest rates will stay higher for longer.

BoE policymaker Catherine Mann said on Tuesday that inflation above the Bank’s 2% target appeared to have become entrenched in the economy. She warned that inflation could approach 4% around the turn of the year, when wage negotiations typically take place, potentially further embedding price pressures.

On the data front, UK construction activity continued to contract in September, but at a slower pace than anticipated. Builders also became less optimistic about the outlook, delaying major projects as higher interest rates, persistent inflation and weak order books weighed on growth expectations.