05.11.202612:18:40UTC+00UK Gilt Yields Trim Losses After BoE Rate Hike

The UK 10-year gilt yield pared earlier declines after the Bank of England raised its key interest rate by 25 basis points to 4%, the first increase in more than three years. The Monetary Policy Committee voted 8–1, with Catherine Mann dissenting in favor of a larger 50 basis point hike. Governor Andrew Bailey indicated that further rate rises may be required unless the war in Iran is resolved, which could help alleviate the inflationary pressures prompting the latest move.

Market participants have since strengthened expectations for additional monetary tightening, with three further rate increases now fully priced in by November 2027. The BoE also warned that inflation could peak at 4.9% in Q2 2027, while its adverse scenario projects a sharper rise to 6.2% in Q3.

Despite upward pressure on domestic yields, global bond markets found support from Brent crude prices hovering near two-month lows and a decline in US Treasury yields following a sweeping Democratic victory in the US midterm elections.