The yield on the UK’s 10-year Gilt has been around 3.3% since January 12th, well below a 14-year high of 4.5% hit in September 2022, as investors are coming to terms that an expected recession will force the Bank of England to pause monetary tightening.
Investors believe the Bank of England will raise interest rates again to 4% on Thursday but are split on how much further borrowing costs will rise beyond that.
Meanwhile, the UK consumer price inflation eased as expected to 10.5% in December, but remained well above the Bank of England's target of 2%, while the core rate held close to October's record high.
Looking at growth, weaker-than-expected PMI numbers in January revived recession fears, with business activity falling at its fastest rate in two years, amid rising interest rates, strikes, and weak consumer demand due to the rising cost of living.