UK 10-year bond yield climbs 10bps as selloff extends

UK 10-year bond yield climbs 10bps as selloff extends

UK 10-Year Bond Yield Climbs 10bps as Selloff Extends

The UK 10-year gilt yield rose 10 basis points to 4.55% on March 3, 2026, extending a selloff in government bond markets amid renewed concerns over fiscal policy and inflation dynamics. The move follows mixed signals from recent budget measures and evolving expectations for Bank of England (BoE) monetary policy.

Goldman Sachs Research notes that while the UK's autumn budget introduced fiscal adjustments, including revised borrowing forecasts and tax changes, the market's initial reaction to the announcement led to volatility in gilt yields. The firm attributes the selloff to a reassessment of risk premia—investors' demands for compensation for holding bonds—driven by uncertainty around fiscal sustainability rather than a sharp revision to macroeconomic forecasts.

Looking ahead, Goldman Sachs forecasts a gradual decline in 10-year gilt yields, projecting a drop to 4.25% by year-end 2025 and 4% by December 2026, contingent on the BoE's rate-cutting trajectory. The BoE is expected to reduce its policy rate to 3% by mid-2026, following four cuts totaling 75 basis points. This aligns with expectations of slowing inflation, which is projected to fall to 2.3% in 2026, and modest GDP growth of 1.1% next year.

The budget also spurred a shift in investor focus toward UK equities, particularly mid-cap stocks and sectors like real estate and utilities, which benefit from lower interest rates. However, fiscal measures—including higher taxes on savings income and reduced ISA cash investment limits—have introduced mixed signals for equity markets.

While the recent selloff reflects short-term jitters, analysts emphasize that gilt yields remain anchored by the broader outlook for monetary easing. "The risk premium in the gilt curve remains elevated but disconnected from the macroeconomic outlook," said George Cole of Goldman Sachs. Markets will closely monitor BoE policy and fiscal developments to determine the trajectory of bond yields in the coming months.

(https://www.goldmansachs.com/insights/articles/what-the-uk-budget-means-for-its-bond-and-stock-markets): Goldman Sachs Research, What the UK Budget Means for Its Bond and Stock Markets (November 2025).