FX.co ★ UK 10 Year Gilt Yield Rebounds from 3-Week Low

The yield on the UK 10-year gilt rose to 5.38%, rebounding from a three-week low reached on October 15, as investors digested stronger economic data and reassessed the outlook for interest rates and public finances. UK GDP unexpectedly grew by 0.1% in August, defying expectations of a contraction. This resilience has reinforced expectations that the Bank of England could raise interest rates, with markets largely pricing in a 25-basis-point increase on November 5, though those expectations have eased slightly in recent days.

Governor Andrew Bailey noted that there is currently limited evidence that higher energy costs are feeding through into broader price and wage pressures, but he cautioned that it is still too early to judge the risk of more persistent inflation. In contrast, other policymakers, including Megan Greene and Huw Pill, have argued for earlier action to head off potential second-round effects.

Meanwhile, Chancellor John Healey is finalizing his October 29 budget, pledging measures aimed at providing some economic relief while maintaining the government’s commitment to reducing the deficit.