The UK’s 10-year gilt yield surged to a two-week high of 4.556%, driven by stronger-than-expected GDP data.
UK gilt yield rises on strong GDP data
The UK economy grew by 0.1% in the fourth quarter, defying economists’ predictions of a contraction. December’s monthly GDP reading was particularly notable, coming in at 0.4%, well above the anticipated 0.1%, marking the highest growth since March.
In response to this positive data, markets revised their expectations for 2025 rate cuts, scaling back on the likelihood of an immediate easing cycle by the Bank of England. The stronger-than-expected economic performance has reduced the urgency for the central bank to act aggressively, with inflationary pressures still in focus.
US traders delay Fed rate cut to December
Meanwhile, traders in the US adjusted their expectations for the next Federal Reserve rate cut, anticipating a potential move in December. With persistent inflationary pressures and Federal Reserve Chair Jerome Powell’s cautious stance, markets have priced in a slower approach to easing, suggesting that the Fed is in no rush to reduce rates in the near term.
