FX.co ★ UK Bond Yields Edge Lower

The UK 10-year gilt yield slipped to 5.4%, mirroring the move lower in US Treasury yields following the US market holiday. Oil prices, meanwhile, broke a three-session winning streak as investors weighed the impact of renewed Russian diesel exports against mounting geopolitical tensions.

Domestically, focus is shifting toward Chancellor John Healey’s forthcoming Budget later this month, after the Institute for Fiscal Studies cautioned that the government must identify £35 billion in additional funding to deliver on its spending plans. The warning has intensified speculation over potential tax rises.

On monetary policy, hawkish Bank of England policymaker Megan Greene argued that stronger-than-expected growth and a robust labour market indicate that interest rates should stand above the current 3.75% to bring inflation under control. Markets are currently pricing in four rate increases over the next 12 months, a path many analysts view as overly aggressive, particularly as several policymakers already regard the existing rate as above neutral.