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UK 10-year gilts break below two percent on later rate hike expectations

FXStreet (London) - UK 10-year yields have rebounded after breaking below 2 percent for the first time in six weeks.

Yields hit a low of 1.992 percent, pushed lower by Bank of England governor Mark Carney’s testimony before the Treasury Select Committee in which he reiterated external risks to UK growth while warning that it was “more likely than not” that UK inflation would dip below 1 percent.

Carney’s MPC colleague Jon Cunliffe added that weak pay and inflation data, coupled with the strength in participation, have been the key reason why, despite unemployment falling through the 7 percent threshold in May, he has "concluded in subsequent meetings that there remains substantial spare capacity in the labour market.”

The TSC testimony helped to solidify expectations that any rate hikes would be pushed well into 2015.

UK 10-year gilts are currently trading at a yield of 2.003 percent, falling 0.046 on the session, and continue to challenge the 2 percent barrier.

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