UK bonds suffer biggest monthly fall in years
UK bond prices recorded their sharpest fall in years this month, as investors bet on a rebound in growth and possibly inflation.
The fall comes just days before the budget, in which Chancellor Rishi Sunak will set out his economics plans for the UK.
The month’s sharp declines largely reflect a global sell-off led by US Treasuries. But gilts received an extra push on Friday after the Bank of England’s chief economist, Andy Haldane, warned that the “tiger” of inflation was stirring.
Ten-year gilt yields touched 0.836 per cent, their highest level since March 2020, when the Bank of England was forced to intervene to calm turbulent markets at the start of the coronavirus pandemic.
Since the start of February, 10-year yields have jumped by nearly 50 basis points according to Refinitiv data.
British short- and medium-dated gilt yields peaked today after Haldane said he feared that inflation – currently well below the BoE’s 2 per cent target – could rise faster than the BoE forecast earlier this month.
“There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” he said.
Haldane’s concerns are not widely shared on the BoE’s Monetary Policy Committee.
Deputy Governor Dave Ramsden, speaking after Haldane, said he was reassured by relatively stable inflation expectations in financial markets and among the public.