LONDON - British five-year government bond yields jumped to their highest since April 2011 on Monday, pushing past a previous high set in June as gilts extended a sell-off which began last week after stronger-than-expected inflation and labour market data.
Five-year yields peaked at 2.374%, up more than 10 basis points on the day, while two-year gilt yields struck a fresh 11-year high of 2.619% as they underperformed against German and U.S. government debt.
Financial markets are fully pricing in a second consecutive half-point interest rate rise by the Bank of England next month, which would take Bank Rate to 2.25%, and they see a 27% chance of a 0.75 percentage-point increase.
Economists at U.S. bank Citi forecast earlier on Monday that British consumer price inflation will exceed 18% in January as energy prices soar, its highest level since 1976, potentially pushing the BoE to raise rates as high as 6% or 7%.
