UK government bonds fell, pushing 10-year yields to the highest level in almost a month, as investors’ outlook for inflation increased before a report that economists said will show consumer prices stagnated in March.
The UK 10-year break-even rate, a measure of the outlook for inflation derived from a difference in yield between gilts and index-linked bonds, climbed to the most in two weeks.
Oil prices have jumped 30 percent since touching a six-year low in January, reducing the risk of consumer prices falling. Yield increases have so far been limited by prospects of the Bank of England keeping interest rates at a record low for the rest of the year.
“Though the consensus is for a flat reading, there could be a sense that there might potentially be an upward surprise because of higher” fuel prices during March, said Vatsala Datta, a UK rates strategist at Royal Bank of Canada in London.
