UK 3-year gilt yield actual 4.263% (forecast -, previous 4.294%)

UK 3-year gilt yield actual 4.263% (forecast -, previous 4.294%)

The UK 3-year gilt yield experienced a significant increase, reaching 4.263% on March 18, according to data from Trading Economics [1]. This marked a 0.08% rise from the previous trading session and represented the highest level recorded since June 2008 [2].

The surge in the gilt yield reflects growing concerns over inflation and interest rates in the UK. According to Trading Economics, the UK 3-year gilt yield is expected to trade at 4.1570 by the end of this quarter and 4.1199 in one year [1].

The rise in gilt yields also has implications for conventional UK gilts. These bonds, which are sterling-denominated UK government bonds, typically offer fixed coupon payments to investors. The higher the gilt yield, the less attractive the fixed coupon payments become relative to the prevailing market rates [3].

The UK government's bond market performance has been closely watched in recent months as economic uncertainties continue to mount. Inflation in the UK has remained persistently high, with consumer prices rising by 5.5% in January, according to data from the Office for National Statistics [4].

Moreover, the Bank of England has signaled its intention to raise interest rates further to combat inflation. In February, the central bank raised its benchmark interest rate by 0.25 percentage points to 4% [5].

The rise in interest rates and inflation has led to concerns over the potential impact on the UK economy. Some analysts have suggested that higher borrowing costs could lead to a slowdown in economic growth, while others argue that the Bank of England's actions are necessary to maintain price stability [6].

Overall, the surge in the UK 3-year gilt yield to a four-year high reflects growing concerns over inflation and interest rates in the UK. The impact of these developments on conventional UK gilts and the wider economy remains to be seen.

References:

[1] Trading Economics. (2023, March 18). UK 3 Year Bond Yield. https://tradingeconomics.com/gukg3y:ind

[2] Trading Economics. (2023, March 18). United Kingdom 3 Year Note Yield. https://tradingeconomics.com/united-kingdom/3-year-note-yield

[3] Dividend Data. (n.d.). UK Gilts Prices, Yields. https://www.dividenddata.co.uk/uk-gilts-prices-yields.py

[4] Office for National Statistics. (2023, February 16). Consumer price inflation, January 2023. https://www.ons.gov.uk/economy/inflationandpriceindices/articles/02/02/consumerpriceinflationjanuary2023/

[5] Bank of England. (2023, February 2). Monetary Policy Summary. https://www.bankofengland.co.uk/monetary-policy/docs/2023-02-02/monetary-policy-summary.pdf

[6] Reuters. (2023, March 18). UK inflation hits 31-year high, adding to pressure on Bank of England. https://www.reuters.com/world/uk/uk-inflation-hits-31-year-high-adding-to-pressure-on-bank-of-england-2023-03-17/