UK 10-year gilt yields hit highest since Bexit vote; weakness in GBP boosts inflation expectations

The UK 10-year gilt yields touched to the highest since Brexit vote in June as weakness in the British pound boosted inflation expectations. Also, bond prices tracked a retreat in the U.S. Treasuries and dipped on Monday.

The yield on the benchmark 10-year gilts, which moves inversely to its price, rose 8 basis points to 1.174 percent, the super-long 40-year bond yield jumped 6 basis points to 1.685 percent and the yield on short-term 2-year bond climbed 1 basis point to 0.228 percent by 09:50 GMT.

According to Bloomberg, gilt yields have been climbing for the past three weeks as sterling’s 18 percent slide since the vote to leave the European Union drove a market gauge of inflation expectations to the highest in 2-1/2 years. Faster inflation erodes the fixed payments on bonds, while also making it less likely the Bank of England will be able to cut interest rates and extend its asset purchases.

On Friday, the U.S. Government bond yields climbed across the board with long-term 30-year bond yields touched four-month high as a rebound in Chinese inflation data eased concerns about sluggish growth from the world's second largest economy amid solid U.S. retail sales and inflation data.

Lastly, investors will remain keen to focus on the upcoming CPI, claimant count change, 10-year Treasury gilt auction and retail sales.

Meanwhile, the FTSE 100 traded 0.74 percent lower at 6,961.90 by 10:00 GMT.