Yields on two-year gilts climbed to the highest level since 2008 as strong labour market figures drove expectations that UK interest rates would stay higher for longer.
Figures showed that regular pay growth was 7.2 per cent between February and April this year – the highest growth rate seen outside of the pandemic. Unemployment remains low at 3.8 per cent, while vacancies fell.
Following the release, Barret Kupelian, senior economist at PwC, said the "abnormally hot labour market" meant the Bank of England would have to "raise and keep interest rates longer to a level higher than anticipated”. Markets now expect policymakers to increase interest rates by more than one percentage point to a peak of over 5.5 per cent by the end of the year.