The government’s borrowing costs have hit their lowest level since May, as market traders increasingly bet on cuts in interest rates.
Following unexpectedly weak retail sales in October, which suggested a struggling British economy, the yield on 10-year UK gilts has fallen over 11 basis points to 4.03%. This yield represents the return the government commits to paying those who purchase its debt.
In light of the disappointing retail sales figures, money markets are now forecasting a total of 84 basis points in rate cuts by the Bank of England for the next year, an increase from the 78 basis points anticipated on Thursday.
Traders are predicting that the first quarter-point reduction from the 15-year high of 5.25% will occur by June.
Simultaneously, for the first time, money markets are projecting that the European Central Bank will lower interest rates by a full percentage point next year, reducing them from their record high of 4% to 3%.
