Capital Economics: As inflation worries ease, UK government bond yields may fall further.

James Reilly of Capital Economics stated in a report that, due to the fall in oil prices and easing concerns about inflation, the UK government bond yields may further decline. In recent weeks, the significant drop in oil prices has alleviated concerns about high energy prices pushing up inflation. Reilly said that he expects UK investors to reduce their expectations of a rate hike by the Bank of England, leading to further declines in UK government bond yields. He said that by the end of 2027, the 10-year UK government bond yield could drop to 4.25%. However, Reilly also mentioned that due to persistent political risks, long-term yields may remain elevated. Data from Tradeweb shows that the 10-year UK government bond yields have dropped more than 5 basis points to a two-and-a-half-month low of 4.696%.