(Geo-) Politics and the Gilt Market: The Drama Behind Yields
In March 2026, we hosted a webinar on how geopolitics and UK fiscal policy are driving moves in the gilt yield curve and what this means for housing association funding and risk management. The session focused on how markets are reassessing fiscal risk, recalibrating expectations for Bank of England rate cuts and responding to renewed energy price shocks.
The webinar was led by Cathal Kennedy, Senior UK Economist at RBC Capital Markets, who provided an expert update on the macro backdrop, Bank of England (BoE) policy expectations and market reaction to the latest energy-driven inflation shock.
Key takeaways from the webinar include:
- Political and fiscal risk: Heightened UK political churn is increasingly expressed through a fiscal risk premium, leaving gilts sensitive to leadership uncertainty and budget signals.
- Inflation expectations: CPI was expected to head back to target in 2026, but the energy‑driven inflation shock and still‑elevated household expectations are making near‑term BoE rate cuts harder to justify.
- Fiscal sustainability: Public Sector Net Borrowing remains around 5% of GDP, with markets questioning the realism of tight spending plans and the durability of current fiscal rules.
- Gilt supply and market pricing: Gilt yields continue to trade above G7 peers, with recent geopolitical events prompting a sharp repricing of the front end as investors shift from expecting two cuts to pricing multiple hikes
Please find the webinar recording and presentation below.
