UK 10-year gilt yields climbed to 4.6%, their highest level since mid-October, as renewed political uncertainty pressured longer-dated debt ahead of the Bank of England’s policy announcement later today. The spread between two- and 10-year gilts widened to its largest since 2018, highlighting growing term premia and investor unease. Political risk has intensified following Prime Minister Keir Starmer’s appointment of Peter Mandelson as UK ambassador to the US, a move that has drawn scrutiny due to Mandelson’s past links to Jeffrey Epstein and raised fresh questions about the durability of Starmer’s leadership. Meanwhile, the Bank of England is widely expected to leave the benchmark interest rate unchanged at 3.75%, with markets focused on the minutes, forward guidance, and the inflation and labor market outlook. While policymakers continue to signal that the next move in rates is likely downward, uncertainty remains around the timing, pace, and ultimate extent of any easing cycle.
