UK 2-year gilt yields rise after BoE signals stimulus reversal By Reuters

LONDON (Reuters) – The yield on two-year British government bonds is on course for its biggest weekly rise since February as investors brought forward their bets on when the Bank of England will start to raise interest rates.

The two-year gilt yield rose by more than four basis points to hit 0.137% on Friday, its highest since July 16, and is 7.5 basis points up on the week according to Refinitiv data, the biggest weekly rise since the week ending Feb. 26.

On Thursday, the BoE spelled out plans for a “modest” reversal of its huge stimulus to support the economy through its COVID-19 lockdowns.

Rate futures suggested investors were pricing in a first 15 basis-point rise to take the BoE’s benchmark Bank Rate to 0.25% by May next year. Before Thursday’s announcement by the central bank, rate futures pointed to a hike in August 2022.

The BoE said on Thursday it would let its huge stockpile of government bonds to begin to decline, by not reinvesting maturing gilts, when its benchmark Bank Rate reaches 0.5%. It plans to consider selling debt when the rate 1%.