The yield on the UK 10-year government bond has fallen to around 5.35%, but remains close to its highest level in 19 years.

⑴ The yield on the UK 10-year government bond fell back to around 5.35% on Friday, as the surge in energy prices paused ahead of the key US CPI report, which could strengthen expectations of a Federal Reserve rate hike next week. ⑵ Despite the slight retreat, government bond yields remain near 19-year highs, with the cumulative increase this week expected to exceed 20 basis points. ⑶ Investors are digesting stronger-than-expected UK GDP data, with a 0.4% month-on-month increase in July, exceeding forecasts, driven by expansion in the services sector. Three-month growth through July was unchanged from the previous value at 0.4%. ⑷ Brent crude oil remains near a four-month high, and UK natural gas prices are still close to a three-and-a-half-year high, further fuelling renewed inflation concerns. ⑸ The market has fully priced in four rate hikes by the Bank of England by the end of 2027, with Governor Bailey emphasizing that future decisions will depend on economic and geopolitical developments.