Traders increase their bets on a rate cut by the Bank of England, with two-year UK bond yields falling to a 14-month low.

Jin10 data reported on October 22, the UK's inflation unexpectedly remained stable last month, supporting further rate cut rationale, as traders increased their bets on the Bank of England cutting rates. The money market currently anticipates that the Bank of England will cut rates by 17 basis points by December, which corresponds to an approximately 70% chance of a 25 basis point cut. Before the data release, the likelihood of a rate cut before the end of the year was slightly above one-third. Driven by shorter-term bonds that are more sensitive to monetary policy, UK government bond prices surged significantly. The yield on two-year government bonds fell by as much as 10 basis points to 3.75%, the lowest level since August 2024.