The UK 10-year gilt yield eased to about 4.51%, down from a six-week high of 4.539% reached last week, as government bonds gained alongside US Treasuries. Falling oil prices helped to calm inflation concerns, encouraging investors to add modestly to bets on future monetary easing by the Bank of England. Markets are currently pricing in just one further rate cut in 2026, expected in the first half of the year. The BoE cut interest rates by 25 basis points to 3.75% in December in a narrow 5–4 vote, highlighting policymakers’ lingering worries about inflation. Although headline inflation slowed to 3.2% in November, it remains well above the 2% target, and Governor Andrew Bailey has signalled that any further cuts will likely be gradual. The latest economic data showed weaker mortgage demand, but a sharp rise in consumer borrowing.
