UK bond market remains stable ahead of Autumn Budget, potential opportunities seen, interest rates expected to fall.

From Morningstar: 2025-06-27 11:17:00

The first half of 2025 saw global bond yield volatility due to US tariffs, Middle East conflict, interest rate cuts, and Europe’s defense spending. Political risk in the UK remains stable, with the Autumn Budget approaching. UK gilt market reflects global trends, with a steepening yield curve and expectations of interest rate cuts.

Bond markets are nervous but not panicking ahead of the UK Budget. Fund managers see potential opportunities in UK bonds amid global yield curve trends. Interest rates are expected to fall further, reflecting inflation differences with the eurozone. The Bank of England is gradually selling UK debt acquired during quantitative easing.

UK bond supply remains in demand, with auctions oversubscribed. Retail investors show interest in UK government bonds for appealing yields. As global investors rotate away from US assets, UK debt may benefit. UK assets are seen as safe havens with low default risk and strong governance. Asset managers increase exposure to UK and German debt while maintaining neutral positions in the US and Japan.



Read more at Morningstar: The UK Government Bond Outlook for Q3 and Beyond