Gilts outperformed on Wednesday morning after one of the Bank of England’s own hawks pushed back against market pricing. The 10-year gilt yield fell 5.3 basis points to 5.839 percent in European trade, a larger fall than the 1.3 basis point drop in the 10-year Bund to 3.450 percent, after chief economist Huw Pill said he was more sceptical about market pricing of four quarter point increases over the next year.
Pill’s scepticism carries weight because of where he sits. He was one of three Monetary Policy Committee members, with Megan Greene and Catherine Mann, who voted in September to raise Bank Rate from 3.75 percent to 4.00 percent, against a six member majority for no change. A dissenter for tightening who still questions four hikes is telling markets the priced path exceeds even the hawkish case on the committee, while adding that the Bank still has work to do to get policy into the right position.
Governor Andrew Bailey, speaking on Tuesday, repeated that pressure on broader inflation from the energy shock has so far been subdued, while warning that the longer it goes on, the harder it gets. UK CPI was 3.1 percent in August, and the September MPC expected it to reach about 3.75 percent in the fourth quarter and slightly above 4 percent in early 2027.
For gilt investors, Wednesday’s move is a reminder that the UK curve now prices a tightening path that senior officials are actively discounting in public. That does not make gilts cheap at 5.839 percent for 10 years, but it changes the asymmetry: the next large move needs either a data surprise or a change of mind on the committee, not momentum alone.