LONDON – British borrowing costs fell sharply on Wednesday after lower-than-expected consumer inflation data in the U.K. and U.S.

The output is 10-Year UK Government Bond It was down 16 basis points at 4.727% at 4pm in London, which would be the first single-day decline since December 31. The index has surged since the start of the year on concerns about the country’s growth prospects and debt burden, with benchmark yields hitting their highest levels since 2008.

The output is 2 years UK bonds, known as gilts, fell 15 basis points to 4.45%. long term yield 30 year bond Down 15 basis points from the 27-year high.

Investors cheer UK inflation data Annual growth was 2.5% in December, slightly below the 2.6% forecast by economists polled by Reuters. The closely watched services sector inflation rate fell to 4.4% from 5%, the lowest level since March 2022.

The news both reinforced expectations for a rate cut by the Bank of England in February and was seen as a much-needed glimmer of good news for finance minister Rachel Reeves.

reeves is Coping with economic stagnation and appear in Risk of breach of self-imposed fiscal rules Provides that all day-to-day government spending is funded entirely by revenue, with the goal of reducing the national debt-to-GDP ratio. UK monthly economic growth data for November will be released on Thursday.

Bond markets were largely unaffected auction The release of the 2034 bonds in mid-morning UK time showed interest in UK bonds remained strong despite recent volatility in bond markets, but demand was lower than last year.

However, after the release of Treasury bonds, the decline in yields accelerated. US consumer price indexwhich helps ease concerns about a resurgence in inflation while also sending U.S. Treasury yields sharply lower. The headline U.S. consumer price index (CPI) was in line with the annual forecast, but core inflation excluding food and energy was slightly lower than expected.

U.S. Treasuries also experienced a selloff in 2025 as traders braced for cautious interest rate cuts by the Federal Reserve this year.

Gabriella Dickens, G7 economist at AXA Investment Managers, warned that the fall in headline UK inflation could be short-lived as the drag on energy prices continues to ease.

Dickens added: “We do not think this means there is an inherent inflation problem in the UK, as markets appear to have been concerned about this in recent months.”

“We see increasing risks of inflation running below target over the medium term and, as a result, the BoE will continue to monitor near-term price pressures this year.”