The UK 10-year gilt yield jumped to a two-week high of 4.78%, rising for a third straight day as global bond markets sold off amid renewed inflation fears driven by escalating US-China trade tensions.
UK 10-year gilt yield surges to two-week high
China announced it will raise tariffs on US goods to 84% from 34% starting April 10, in retaliation for the US hiking duties on Chinese imports to over 100%. The sudden escalation in trade hostilities has revived concerns about a potential inflationary shock across global supply chains, with investors demanding higher yields to compensate for the heightened uncertainty.
Bank of England Deputy Governor Clare Lombardelli noted that while the direct inflationary impact of the tariffs remains uncertain, the broader economic repercussions could weigh on UK growth through weaker global demand and increased volatility. Despite the inflation concerns, the sharp divergence in yield movements across the curve highlights a complex market outlook. The UK’s 30-year gilt yield surged to its highest level since 1998, reflecting longer-term inflation and fiscal concerns, while the 2-year yield fell 10 basis points as investors ramped up bets on imminent rate cuts by the BoE.
Markets price in 93 basis points of cut in 2025
Markets now price in 93 basis points of monetary easing by the end of 2025, including growing expectations of a bold 50-basis-point cut as soon as May. Traders are increasingly convinced that the BoE will be forced into a more aggressive cutting cycle, now betting on four rate cuts in 2025—up from fewer than three earlier this week—amid signs of softening domestic growth and persistent disinflationary pressures.
