Gilts are set for their best week since July after a run of weak economic data

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Gilts were on track for their best week since July and the FTSE 100 hit a record on Friday, after a string of weak data weighed on sterling and the Bank of England lifted bets it would cut rates sharply to kick-start growth.

A rally in UK government bonds accelerated on Friday after retail sales unexpectedly fell in December, raising fears that the economy may have collapsed late last year.

The 10-year gilt yield fell another 0.07 percentage points to 4.62 percent after the release, taking this week’s low to 0.22 percentage points. Products, on the contrary, move to prices.

Signs of weakness in the strong street include disappointing GDP figures in November and lower-than-expected inflation in December.

In early afternoon trade, the FTSE 100 rose 1.4 percent, surpassing its previous record high in May, helped by a weaker pound. Most of the companies in the blue-chip index are dollar-denominated, meaning they benefit from a stronger U.S. currency.

Gordon Shannon, portfolio manager at TwentyFour Asset Management, said: “The better news on inflation makes gilts a safe haven asset.

Rising expectations of rate cuts to support a sluggish economy “made it easier for foreign buyers to come back in[to buy gilts],” Shannon added.

The two-year yield fell 0.06 percentage points to 4.33 percent on Friday, taking this week’s low to 0.2 percentage points.

Traders expect at least two quarter-point cuts this year from the current 4.75 percent and the possibility of a third rate cut, based on levels expressed in volatile markets.

Despite the rally in the gilt market, 10-year yields remained sharply below their 3.75 percent level in mid-September, before both Treasuries sold off and the U.K. is grappling with a race against time — where rates have steadily risen. It is difficult to reduce the Bank of England rates.

This pushed UK borrowing costs to a 16-year high last week, a record high for yields. Interesting A wave of retail investors, however, forced Chancellor Rachel Reeves to do so. Prevention Her economic plans in front of parliamentarians.

Rising borrowing costs have severely limited the chancellor’s leverage over her own fiscal policy. They have big investors warned In order to maintain credibility in the market, the government may be forced to increase taxes or reduce spending.

Traders who gamble on price reductions are encouraged to a Speech This week, one central bank ratemaker said it would need to cut rates five or six times next year to support the economy.

Alan Taylor, a member of the Monetary Policy Committee, recently warned that UK data points to an “increasingly bleak outlook for 2025”, as the central bank needs to take pre-emptive action to support the economy with low borrowing costs.

Low rates are expected to give the chancellor some relief from UK government borrowing costs, but the accompanying weak growth outlook could have a negative impact on budget forecasts if weakness is seen to persist.

The Office for Budget Responsibility is due to present its new Economic and Fiscal Outlook on March 26, with the Chancellor expected to respond with a statement to Parliament.

UK gilts were helped by a headwind from Treasuries, which gathered as data showed weak inflationary pressures in the US economy. That 10-year Treasury yield fell 0.19 percentage points to 4.58 percent.