05.02.202610:03:27UTC+00UK Gilt Yields Climb on Political Jitters

UK 10-year gilt yields have surged to 4.6%, marking their highest point since mid-October. This rise is attributed to increasing political uncertainty, which has put pressure on longer-term debt ahead of the Bank of England's policy announcement today. The yield spread between two- and 10-year gilts has expanded to its widest margin since 2018, indicating growing term premia and investor anxiety. Political tensions have been exacerbated by Prime Minister Keir Starmer's appointment of Peter Mandelson as the UK's ambassador to the US. Mandelson's past associations with Jeffrey Epstein have sparked scrutiny and raised new concerns about the stability of Starmer's leadership. Meanwhile, the Bank of England is widely anticipated to maintain the benchmark interest rate at 3.75%. Market participants are keenly awaiting the minutes, forward guidance, and insights into the inflation and labor market outlook. Although policymakers are suggesting that the next interest rate move will likely be downward, significant uncertainty surrounds the timing, pace, and extent of any potential easing cycle.