FX.co ★ Tariff Shock Lifts Long-End Yields, Fuels BoE Rate Cut Bets

UK 10-year gilt yields increased to 4.67%, marking a third consecutive day of gains amidst a global bond market decline, fueled by inflation concerns sparked by Trump's extensive tariffs. These new tariffs, which encompass rates as high as 104%, primarily target China and affect approximately 60 countries with trade surpluses. Trump has also promised significant upcoming tariffs on pharmaceuticals. Bank of England Deputy Governor Clare Lombardelli indicated that these tariffs might hinder UK economic growth, although the precise impact on inflation is still uncertain. Additionally, 30-year gilt yields have reached their highest level since 1998. Conversely, yields on 2-year gilts decreased by 9 basis points, as market expectations for interest rate cuts by the Bank of England have intensified. Markets are now predicting 93 basis points of rate reductions by the end of the year, including an increasing likelihood of a 50 basis point cut in May. Traders now anticipate four rate cuts throughout the year, up from fewer than three predicted just a few days prior.