Will Gilts remain the sick man of the bond market?

We think long-dated Gilt yields will fall over the next year, ensuring they no longer remain an outlier in the G7. That’s mainly because we expect inflation to fall sharply in 2026 and allow the Bank of England to cut interest rates by more than is discounted in money markets. The Chancellor is also likely to keep investors’ fiscal concerns contained by tightening fiscal policy further in the Budget. That said, waning demand from pension funds may limit how far Gilt yields fall.