image sourced from original article at Gilt yields surged sharply as oil prices climbed above 100 dollars a barrel, fuelling fears of renewed inflation and prompting investors to bet on higher interest rates later this year. Two-year yields jumped significantly, with five and ten-year yields also rising, as bond prices fell amid a global market sell-off linked to conflict in the Middle East.
Traders have dramatically scaled back expectations of interest rate cuts, now believing the Bank of England is almost certain to hold rates at its next meeting. Markets are pricing in a strong possibility of a rate increase by the end of the year, with notable odds of a rise in November or December from the current base rate of 3.75 per cent.
Rising market rates are already feeding through to mortgages, with major lenders increasing their fixed-rate deals following higher swap rates. At the same time, the leading United Kingdom stock index fell sharply, contributing to more than 200 billion pounds being wiped off the broader market since the conflict began.
