Bank of England's Rate Cut Impact

Following the Bank of England's decision to reduce the key interest rate by a quarter of a percentage point to 4.5%, yields on UK government bonds, or gilts, have seen a significant drop. This move reflects the central bank's response to the current economic climate and concerns over the UK's economic stability.

Economic Indicators and Market Reactions

The shift towards safer assets like government bonds is further influenced by the latest GDP data, which showed stagnation in the UK's economic growth during the third quarter of 2024. This economic indicator has led to an increase in gilt prices and a corresponding decrease in yields, highlighting investor caution.

Yield Changes Across Different Maturities

Specifically, the yield on the 10-year gilt decreased by 4.9 basis points to 4.391%, while the two-year gilt yield fell by 5.4 basis points to 4.0900%. Additionally, the 30-year gilt yield saw a decline of 3.8 basis points to 4.993%, indicating a broad market reaction to the Bank of England's policy change and ongoing economic concerns.