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UK Ten-year Gilt yield rises after BOE minutes

FXStreet (Mumbai) - The benchmark bond prices in the UK eased, pushing the yield higher after the Bank of England (BOE) minutes released earlier today revealed a possible increase in the inflationary pressure as unemployment shall continue to drop rapidly due to low productivity of labor.

The Ten-year yield traded at 2.142% at the time of writing, compared to the day’s low of 2.095%. The yields had come under pressure as the BOE had turned dovish in its quarterly inflation report, where it expressed a possibility of inflation falling below 1% in the next six months.

Overall the minutes released today were unsurprising with 7-2 voting on the interest rates. However, there was one paragraph which says, “Given the speed at which spare capacity appears to have eroded over the past year and the possibility that productivity growth would remain weak, there was a risk that any remaining slack might soon be exhausted, causing inflationary pressures to build.”

The minutes sounded hawkish with this paragraph since a high productivity tends to keep price pressures low. However, with low productivity, as in the UK, more workers are employed leading to rapid fall in unemployment and a resultant rise in inflation.

The Ten-year yield hit a high of 2.16%, before erasing part gains to trade at the current rate of 2.142%. The rise in yields pushed the GBP/USD higher towards 1.57 levels.

UK Ten-year yield Technical Levels

The ten-year yield has an immediate resistance located at 2.16%, above which gains could be extended to 2.204%. Meanwhile, a break below 2.10% shall push the yield down to 2.077%.

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