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2026-04-08 22:03:48
[UK Bond Yields Suffer Largest One-Day Drop in Three Years as Market Bets on Bank of England Rate Hike Halved] ⑴ Following the two-week ceasefire agreement between the US and Iran, UK gilt yields suffered their largest one-day drop in three years on Wednesday. The two-year gilt yield fell 25 basis points to 4.148%, the largest single-day drop since the collapse of Silicon Valley Bank in March 2023. ⑵ Investors reduced their bets on the Bank of England's rate hikes this year from 63 basis points on Tuesday to about 32 basis points, equivalent to expecting only one or two 25 basis point hikes. Five-year and ten-year gilt yields fell by about 20 basis points, also marking their largest single-day increase since 2023. ⑶ Since the outbreak of the conflict with Iran on February 28, UK gilt yields, which are sensitive to inflation prospects, have closely linked with oil prices. On Wednesday, oil prices plummeted 16% due to the promise to reopen the Strait of Hormuz. Investec's chief economist said that if the ceasefire continues and turns into a permanent end to the hostilities, the Bank of England may consider the risk of a second round of inflation to be limited, and the Monetary Policy Committee is expected to determine that raising interest rates is unnecessary and resume rate cuts from the beginning of 2027.
