The UK 10-year gilt yield hovered near 4.5% as investors digested rising geopolitical tensions, mixed economic data, and central bank signals. The recent US strikes on Iran over the weekend heightened global uncertainty, boosting demand for safer assets but also stoking inflation fears. On the economic front, UK private sector activity in June grew slightly more than expected, with the S&P Global composite PMI rising to 50.7.
Manufacturing remained in contraction but fared better than forecasts, while services grew in line with expectations. All sectors showed improvement from May. Meanwhile, last week’s Bank of England decision to hold rates steady reflected a cautious stance amid persistent inflation and geopolitical risks. However, the vote split (6–3) surprised markets, with three members pushing for a rate cut. The BoE highlighted “two-sided risks” to inflation and expects price growth to remain sticky before gradually declining toward the 2% target by 2026.
