UK government bond yields fell for a second time on Thursday, pulling further away from Wednesday's 18-year high as a drop in oil prices eased inflation worries. Capital Economics expects the retreat to continue over the coming year.
UK 10-year gilt yields dropped by more than four basis points to 5.195% early on Thursday, moving further away from the 18-year high set a day earlier. Thirty-year yields also eased, down four basis points to 5.831%.
AJ Bell investment director Russ Mould said there is "a measure of calm in government bond markets" today, as Brent crude fell about 0.5% to $95.20 a barrel. A cheaper oil price eases some of the pressure that had been feeding inflation fears and pushing interest-rate expectations higher.
The rally in UK government bonds then continued through the session. By afternoon, the 10-year gilt yield was down more than six basis points to 5.176%, wiping out all of Wednesday's rise and part of Tuesday's.
Capital Economics markets economist Joe Maher said higher energy prices and renewed fiscal concerns had pushed gilt yields to multi-decade highs, but he expects yields to fall back over the next year or so.
Source: Business | The Guardian
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