UK 10-year gilt yields eased to 5.35% as oil prices retreated after a two-day rally, following reports that the US and Iran were considering a phased agreement that could reopen the Strait of Hormuz. Yields remain near multi-year highs because the conflict and elevated energy costs continue to raise concerns about renewed inflation. Markets still price in a solid probability of a 25-basis-point Bank of England (UK central bank) rate increase in November. Bank of England Deputy Governor Sarah Breeden said it could become "increasingly appropriate" to raise rates in response to rising inflation risks. Deputy Governor Clare Lombardelli said rates may also need to rise if energy prices stay elevated, while Monetary Policy Committee member Swati Dhingra said inflation expectations were not yet a concern. In the United States, investors increased bets on further Federal Reserve rate hikes after hawkish comments from policymakers.