UK 10-year yield falls 2bps to 4.33%, lowest since Dec. 2024

UK 10-year yield falls 2bps to 4.33%, lowest since Dec. 2024

UK 10-Year Gilt Yield Hits 4.33%, Lowest Since December 2024

The UK 10-year gilt yield fell 2 basis points to 4.33% on February 23, 2026, marking its lowest level since December 2024, as investors digested a combination of favorable fiscal data, easing inflation, and expectations of monetary policy easing. The decline follows a record £30.4 billion public sector surplus for January—the highest monthly surplus since records began in 1993—alongside weaker-than-expected labor market figures and slowing inflation.

Annual inflation cooled to 3.0% in January, the weakest reading since March 2025, driven by slower price increases in transport and food, while core inflation fell to 3.1%, its lowest since August 2021. Meanwhile, average weekly earnings growth slowed to 4.2% in the three months to December, the weakest pace since August 2024, and the unemployment rate rose to 5.2%, its highest since early 2021. These developments have bolstered expectations for Bank of England (BoE) rate cuts, with traders fully pricing in a 25-basis-point reduction by April and a 76% probability of a cut as early as March.

The fiscal backdrop has also improved, with the government's increased budget headroom and a shift in borrowing strategy toward short-term Treasury bills (T-bills) reducing supply pressures in the long-end of the gilt market. The Debt Management Office's plan to issue more short-dated debt has reassured investors, contributing to the decline in longer-term yields.

Looking ahead, the UK 10-year yield is projected to trade at 4.39% by the end of the quarter, with further declines anticipated as inflationary pressures ease and the BoE maintains a dovish stance. However, uncertainties around U.S. trade policy and global economic conditions remain watchpoints for market stability.

This article is based on publicly available data and does not constitute investment advice.