Key Facts
• On August 18, UK 30-year inflation-linked bond yields hit 2.56%, highest since 1998.
• Yield surpasses the 2022 peak during market turmoil caused by former PM Truss’s policies.
• Standard UK bond yields also rose, adding pressure on Finance Minister Rachel Reeves.
• Bank of England expected to maintain policy rate at 4% through 2025 due to steady economy.
• German 10-year bond yields fell by 2 basis points to 2.76%, briefly reaching 2.74%.
• Spread between Italian and French 10-year bonds narrowed to under 10 basis points.
• Italian-French bond yield gap is smallest since 2005, reflecting changing investor sentiment.
• European stocks remained flat as investors awaited geopolitical developments.
• STOXX Europe 600 Index showed minimal change; healthcare and telecom sectors rose.
• Construction and mining stocks saw declines amid cautious market activity.
Summary
On August 18, UK 30-year inflation-linked bond yields surged to 2.56%, the highest level since 1998, surpassing the 2022 peak during market instability under former Prime Minister Liz Truss. Standard UK bond yields also rose, increasing fiscal pressure on Finance Minister Rachel Reeves. The Bank of England is expected to maintain its policy rate at 4% for the rest of the year, supported by a resilient economy and controlled inflation. Meanwhile, German 10-year bond yields fell to 2.76%, and the Italian-French bond yield spread narrowed to its smallest since 2005, reflecting shifting investor sentiment. European stocks remained largely unchanged, with the STOXX Europe 600 Index showing minimal movement. Healthcare and telecom sectors gained, while construction and mining stocks declined. Investors adopted a cautious stance ahead of geopolitical developments, including a meeting between U.S. President Donald Trump and Ukrainian President Volodymyr Zelensky.
