Bank of England Cuts Key Rate

In a move that has sent ripples through the financial markets, the Bank of England has decided to lower its key interest rate by a quarter of a percentage point, bringing it down to 4.5%. This decision comes at a time when the UK economy shows signs of stagnation, with recent data revealing that the gross domestic product remained unchanged in the third quarter of 2024.

Impact on Gilt Yields

The immediate effect of this monetary policy adjustment was a noticeable shift towards safer assets, such as government bonds. This shift has been further fueled by growing concerns over the health of Britain's economy. Consequently, the yields on UK government bonds, or gilts, have seen a significant drop. Specifically, the return on the 10-year gilt fell by 4.9 basis points to 4.391%, while the yield on the two-year gilt declined by 5.4 basis points to 4.0900%. Moreover, the return on the 30-year gilt experienced a slight decrease, slipping by 3.8 basis points to 4.993%.