UK Bonds’ Best Run in Two Years Is Winning Over Global Investors

Core Viewpoint - The UK bond market has experienced a significant rebound, with expectations of interest-rate cuts driving investor confidence and narrowing the yield gap compared to other G7 nations [1][6]. Group 1: Market Performance - UK gilts achieved their best performance in nearly two years, attracting investments from major firms like Aberdeen Group Plc, Fidelity International, and JPMorgan Asset Management [2]. - Market expectations for Bank of England interest-rate cuts are fueling this positive momentum, with some strategists predicting a surprise cut in an upcoming meeting [3]. Group 2: Economic Indicators - Recent data indicates that UK inflation remained steady in September, with food prices experiencing their largest decline since late 2020, challenging previous narratives about persistent price pressures [7]. - Money markets are now anticipating 60 basis points of rate reductions over the next year, an increase from 40 basis points at the beginning of October [8]. Group 3: Political Context - The UK’s turbulent debt markets, exacerbated by previous unfunded budget plans, are expected to remain a focal point ahead of Chancellor Rachel Reeves' budget announcement on November 26, which may include tax increases to adhere to fiscal rules [5].