Inflation Concerns | UK 10-Year Bond Yields Break Through 5% Level

SighingCashier · 2026-03-20T18:31:20+00:00

The UK's 10-year gilt yield broke through 5% on Friday, hitting its highest level since the 2008 financial crisis, as the US-Israel conflict with Iran impacts markets and rising oil prices could push up inflation. The Bank of England kept its benchmark interest rate unchanged, but the market expects rate hikes to come soon, with some forecasts predicting rates could reach 4.25% by year-end. Rising borrowing costs and February government borrowing that exceeded expectations have intensified selling pressure in the bond market.

SighingCashier

2026-03-20 18:31:20

Abstract generation in progress

The yield on the UK 10-year government bond rose above 5% on Friday, reaching the highest level since the 2008 financial crisis. The UK’s borrowing costs surged to their highest since the financial crisis of 2008. The two-year UK bond yield has increased by a total of 44 basis points this week.

Due to ongoing conflicts between the US and Israel against Iran, the UK bond market is particularly sensitive to concerns about inflation rebound, partly because the UK relies on imported energy, and rising oil prices are expected to push inflation higher.

Before the outbreak of war, the UK’s government borrowing costs were already the highest among the G7 countries, with the yields on 20-year and 30-year bonds well above the key 5% threshold. On Friday, these yields increased by approximately 9 and 7 basis points, respectively.

The Bank of England’s Monetary Policy Committee (MPC) unanimously voted on Thursday to keep the benchmark interest rate unchanged, citing that the economy is facing new shocks and that inflation is expected to rise in the short term. After the announcement, Nigel Green, CEO of deVere Group, told CNBC that the market is rapidly dismissing expectations of a rate cut by the Bank of England. Before the Middle East war outbreak, markets had anticipated a rate cut.

Currently, according to data from the London Stock Exchange Group (LSEG), most market participants believe that the likelihood of a rate cut by the Bank of England this year is almost zero. The majority of traders expect an interest rate hike next month and generally expect the key rate to reach at least 4.25% by the end of the year, implying at least two rate increases.

Official data on Friday showed that UK government borrowing in February reached £14.3 billion, exceeding expectations and further intensifying selling pressure in the bond market.

View Original

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.