Surging flash PMI data pushes UK bond prices down

UK bond prices experienced a notable decline on Thursday, driven by robust flash Purchasing Managers' Index (PMI) data that surpassed expectations. The intensified market activity led to a reevaluation of predictions regarding the timing of potential interest rate cuts by the Bank of England.

In response to the data, two-year gilt yields witnessed a notable uptick of over 8 basis points (bps) to reach 4.681 per cent, marking the highest level since November 14. Simultaneously, 10-year yields climbed by 5 bps, reaching 4.213 per cent.

Market dynamics reflected a shift in expectations, with probabilities for a 25 basis-point rate cut by the Bank of England surpassing 50 per cent for the August meeting. Notably, these expectations were fully factored in for September, signalling a slight delay compared to pre-data forecasts.

Analysts pointed to the Autumn Statement delivered by Finance Minister Jeremy Hunt on Wednesday as an additional factor influencing the likelihood of a postponed interest rate cut by the Bank of England. The statement's impact on finance dynamics contributed to the evolving market sentiment, prompting a reassessment of the central bank's policy timeline.

(With PTI inputs)