educe near-term gilt issuance. Derivatives pricing explains the disconnect: futures implied roughly an 80% chance Bank Rate would be cut to 3.5% from 3.75% by the March meeting, and markets were still fully pricing two 25-basis-point cuts by end-2026, per LSEG.
Why should I care?
For markets: Rate bets are driving the UK curve.
When five-year yields drop fastest, it usually means investors are trading the policy outlook, not today’s data. If traders keep adding to cut expectations, UK bonds can stay supported – and that can feed through to pricing for mortgages, corporate borrowing, and equity valuations via a lower discount rate.
The bigger picture: Strong growth can still be bond-friendly.
Better spending and a surprise surplus sound like they should push yields up, but not if investors think inflation is cooling at the same time. The catch is credibility and supply: short-term issuance may ease, yet longer-run fiscal constraints can resurface quickly, which is why the long end tends to stay sensitive even during rallies.