UK bond yields slide ahead of rate decision
UK borrowing costs edged lower on Thursday ahead of the Bank of England’s rate decision, undermining a recent rally that has seen gilt yields rise to their highest levels in more than a year.
this 10-Year Gilt Yield It was down two basis points at 4.536% at 9:30 a.m. London time, while 2-Year Gilt Yield It fell three basis points to 4.481%. Yield is inversely proportional to price.
bond yield spiked Last week, investors pondered the extent of over-borrowing and tax increases announced in the Labor government’s October 30 budget. The rally has since continued into this week, with 10-year Treasury yields hovering near their highest levels since October 2023 following Wednesday’s U.S. presidential election.
Pound rises ahead of rate cut
Sterling rose on Thursday despite widespread expectations that the Bank of England will cut interest rates.
At 8:43 a.m. London time, the pound was up 0.38% against the dollar and 0.25% against the euro.
Cutting interest rates usually depresses currencies. Investors’ focus will now turn to whether the Bank of England will continue its monetary easing policy in light of the recently announced tax increase budget, which some economists believe could stoke inflation.
— Ruksandra Jordash
Fed prepares to cut interest rates on Thursday
Federal Reserve Chairman Jerome Powell speaks during a news conference following the September meeting of the Federal Open Market Committee at the William McChesney Martin Jr. Federal Reserve Building in Washington, DC, September 18, 2024.
Anna Money Tree | Getty Images
The Federal Reserve will also announce its latest interest rate decision on Thursday. US presidential election.
Fed expected to cut interest rates by 25 basis points after steep rate-cutting cycle 50 basis points decreased in September.
— Karen Gilchrist
Sharp fall in inflation paves way for rate cuts
UK inflation sharp drop It rose to 1.7% in September, increasing expectations for a rate cut by the Bank of England in November.
The data was lower than expected, down sharply from 2.2% in August and the first time since April 2021 that inflation fell below the Bank of England’s 2% target.
However, analysts said the decline may be short-lived as an increase in energy price caps set by regulators could push prices slightly higher last month.
Britons brace for higher mortgages despite rate cuts
Rooftops of old red brick suburban houses overlooking London’s financial district.
Overlay Snapshot | Electronic+ | Getty Images
The British face the prospect of higher mortgage rates For a longer period of time after the government tax and spending budget Expectations for a series of recent interest rate cuts were put aside.
Mortgage rates were hit last week after several banks raised borrowing costs amid concerns that Reeves’ fiscal plan could push up economic growth and inflation, delaying the Bank of England’s easing policy.
David Hollingworth, associate director at broker L&C Mortgages, said in a statement on Friday: “It is a confusing time for mortgage borrowers when base rates are expected to fall… but fixed rates look set to rise.”
Virgin Money has become the first major lender to increase mortgage rates since the Budget, increasing mortgage rates by 0.15%. However, the outlook for some banks was divided, with Santander cutting interest rates by 0.36%.
Data from property portal Rightmove shows the average five-year fixed mortgage rate is currently 4.64%, down from 5.36% last year, and the average two-year fixed rate is 4.91%, down from 5.81% at the same time in 2023 last week.
“This isn’t the big spike in rates that has hurt mortgage rates over the past few years. But if financing costs don’t ease, the sub-4% five-year fixed rates we’ve become accustomed to in recent months could be in jeopardy,” Hollingward said Si continued, noting that more lenders may reconsider rates going forward.
— Karen Gilchrist
