April 8 (Reuters) – British government borrowing costs
fell sharply in early trade on Wednesday after the United States
and Iran agreed to a two-week ceasefire, which prompted
investors to slash bets on Bank of England interest rate hikes
this year.
The 5-year gilt yield, which moves inversely to the price,
dropped by 20 basis points in early trade – a bigger fall than
seen in equivalent German yields, but smaller than in France.
Sterling rose sharply against the U.S. dollar on news of the
ceasefire, which also boosted stock indexes.
Investors on Wednesday priced in around 35 basis points of
Bank of England interest rate hikes – or between one and two
quarter-point increases in Bank Rate – compared with 63 bps on
Tuesday.
(Reporting by Andy Bruce; Editing by Kate Holton)