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UK 10-year gilt yields fall to 4.99% as oil prices ease inflation fears

Sterling slipped below $1.35 and 10-year gilt yields fell to 4.99% as easing oil prices and the Bank of England's cautious outlook led markets to trim 2026 rate-hike expectations.

Summary

UK 10-year gilt yields fell to 4.99% and the British pound slipped below $1.35 as markets reassessed the Bank of England's policy path after last week's meeting reinforced expectations that policymakers are in no rush to tighten monetary policy. Investors reduced bets on interest rate hikes in 2026, weighing on sterling and supporting gilts. At the same time, oil prices declined on hopes the US and Iran could reach an agreement to reopen the Strait of Hormuz after the US canceled planned strikes against Iran. President Donald Trump said negotiations with Tehran would resume on Monday, easing fears of further escalation and reducing concerns that higher energy costs would keep inflation and borrowing costs elevated.

Terms & Concepts
  • Gilt yields: The yields on UK government bonds, which move inversely to bond prices and reflect expectations for inflation, interest rates, and economic risk.
  • Strait of Hormuz: A vital oil transit chokepoint between the Persian Gulf and global markets, where disruption can affect crude supply expectations and energy prices.
  • Bank of England policy outlook: Market expectations for the UK central bank's future interest-rate path, which influence bond yields and sterling.