UK gilt yields surges ahead of Bank of England decision

UK gilts continued their sell-off ahead of the upcoming inflation and Bank of England (BoE) decision and the consumer price index (CPI) data. The two-year bond yields jumped to over 5% for the first time since 2008. 

Similarly, the ten-year bond yields rose to 4.48% while the 30-year yields jumped to 4.58%. This means that bond yields have crossed the 2022 high, which happened during the mini-budget crisis. 

As a result, the GBP/USD pair has jumped to 1.2820, the highest level since April last year. It has soared by more than 23% from the lowest level in 2022. The FTSE 100 index has also underperformed its global peers like the Nasdaq 100 and S&P 500 indices.

UK Gilt yields have jumped ahead of the upcoming UK consumer inflation data, which is scheduled for Wednesday. Economists expect the data to show that the headline consumer inflation dropped from 1.2% in April to 0.4% in June. They expect that the CPI dropped from 8.7% to 8.5%.

The Bank of England will deliver its interest rate decision on Thursday. With inflation being above the target of 2.0%, analysts believe that the bank will hike interest rates by another 0.25% to 4.75%. They believe that the central bank’s hikes will peak at 5.5%.

The decision will come a week after the Federal Reserve left interest rates unchanged and after the European Central Bank lifted rates by 0.25%.