Traders rush to reprice gilt yields as inflation shocker puts further easing firmly on the table, and rate cut fever grips the gilt market. The better-than-expected drop in inflation has led investors to price in a more dovish stance from the BoE, with the potential for two rate cuts now being factored into gilt prices. This shift in sentiment has provided some much-needed relief to the bond market, which had been under pressure in recent weeks.

However, markets remain cautious, aware that this respite may be short-lived, with the forthcoming budget casting a long shadow over the market, introducing an element of uncertainty that could lead to increased volatility. The possibility of increased government borrowing to fund investment programmes has kept many bond traders on edge despite the recent yield decline. Moreover, the divergence between UK and global bond yields remains a concern as gilts trade at a premium, reflecting worries about the long-term fiscal outlook.