Analysts attribute the UK’s sharper rate movement to its greater dependence on imported oil and gas, which makes it more susceptible to inflation driven by energy price rises.
Ten-year gilt yields have risen 0.6 percentage points to 5.18% since the start of the year, a more pronounced increase than equivalent government bond yields in the US (up 0.42 percentage points), Germany (0.31 percentage points) and France (0.26 percentage points).
“Mortgage rates and bond yields are responding to the same underlying driver — a sharp rise in inflation expectations linked to higher energy prices from the Middle East war,” said Richard Carter (pictured right), wealth manager at Quilter Cheviot.
“The UK has been hit harder than some of its peers because it is particularly exposed to imported inflation, so rises in oil and gas prices feed through more quickly,” said Richard Carter, wealth manager at Quilter Cheviot. “That has pushed gilt yields up more sharply, with investors also sensitive to factors including political uncertainty and the prospect of higher government borrowing and the watering down of fiscal rules in the event of a change in the prime minister.”
The consumer prices index showed inflation at 3.3% in the year to March, above the Bank of England‘s 2% target and up from 3% in February. April figures are due to be published on Wednesday.