David Milliken

@davidmilliken.bsky.social

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Reuters economics reporter covering the Bank of England, HM Treasury, bond markets and UK data.

The international dimension adds to the already complex environment. If a tighter policy stance were pursued – particularly in the current environment where the old exposure of energy prices adds to inflationary pressure – the higher yields could support demand for UK assets abroad, but also imply a worsening of the primary income balance. Given fragilities and economic uncertainties in the domestic and global financial markets, investor sentiment can shift abruptly. A tighter monetary policy stance could trigger volatility as the new actors unwind positions, potentially leading to tighter domestic financial conditions than intended.
Chart of today's gilt futures (13/05/2026) showing a fall in prices and spike in trading volumes after a Times report that Wes Streeting is preparing to resign)
Arrow chart showing the year-to-date increase in 10-year bond yields for G7 countries, including a 64 basis point rise for 10-year gilt yields since 31 December 2025.
Line chart showing UK 10-year government bond yields over the past 10 years, from the Brexit referendum, through COVID, the 2022 mini-budget crisis and more recent climb due to the Iran war and increased political risks.
Bank of England chart showing the path of APF cash flows under different scenarios described below: In line with previous APF Quarterly Reports, net present value (NPV) figures have also been provided to allow for meaningful comparison between scenarios where cash flows occur at different points in time. In Scenarios 1A and 2A, the NPV from cash flows is approximately -£125 billion. In Scenarios 1B and 2B, the NPV from cash flows is approximately -£60 billion. These figures demonstrate that different unwind paces do not necessarily alter lifetime cash flows, on a NPV basis, and that the path of interest rates has a more important influence on them. It is, however, true that holding onto bonds for a longer period increases the interest rate risk, in terms of the range of possible outcomes for lifetime APF cash flows. A relatively faster pace of QT therefore has the benefit of reducing the interest rate risk borne by the public sector.
These estimates suggest that net lifetime cash flows could be -£125 billion if interest rates evolve in line with market expectations, or -£60 billion if they fall over time to an estimate of the neutral rate. While these scenarios assume a constant £32 billion pace of annual sales, different unwind paces do not significantly alter lifetime cash flows on a discounted basis.
The Bank’s approach to unwinding the APF In September 2025 the MPC voted to reduce the APF’s stock of gilts by £70 billion over the 12 month period from October 2025 to September 2026, comprising both sales and maturities.2 In line with this decision, the Bank has proceeded with the sale of the APF’s stock of gilts. Since October 2025, these sales, in addition to the maturity of gilts held by the APF, have led to a reduction in the stock of gilts held for monetary policy purposes of £33.2 billion as of 29 April 2026. The appropriate pace of gilt stock reduction continues to be guided by a set of key principles. First, the MPC intends to use Bank Rate as its active policy tool when adjusting the stance of monetary policy. Second, sales are to be conducted so as not to disrupt the functioning of financial markets, and only in appropriate market conditions. Third, to help achieve that, sales will be conducted in a gradual and predictable manner over a period of time. Whilst different unwind strategies might affect the timing of cash flows between HMT and the APF, they will not necessarily change the lifetime amount accumulated in the APF. For example, active sales incur upfront costs, but they also reduce lifetime net interest costs from carrying gilts on the APF’s portfolio when Bank Rate is higher than coupon payments. The Bank will continue to monitor the impact of APF unwind on market conditions. The Bank’s operations, as carried out by the Bank Executive, should maximise value for money by minimising cost and risk over the lifetime of the APF, subject to achieving the MPC’s chosen unwind target and in line with the MPC’s key principles. That is achieved, amongst other things, through: • The use of auction mechanisms that are carefully designed to maximise demand and competition. • Close liaison with the Debt Management Office (DMO). • The application of comprehensive risk management techniques.
Chart of daily opening, high, low and closing yields for the two-year benchmark British government bond, since the start of 2026. Green lines are days when yields rose, red are days when yields fell.
Chart showing the correlation between job losses in a sector between March and October 2025 and the percentage of employees on or below the National Living Wage, by the NIESR think tank.
Nine line charts, reflecting job vacancies in the UK, Germany and France for high, medium and low-paid roles, rebased to February 2020
Line chart of UK's main minimum wage rate and rates for apprentices and workers aged 18-20 from April 2018 to April 2026
Bar chart of quarterly UK GDP growth from Q1 2022 to Q4 2025 inclusive, showing stronger growth in Q1 and Q2 each year than in Q3 or Q4.
Chart of sterling against the dollar on 22/02/2026, up to 1145 GMT
detail of Barclays research note saying "UK Budget: Staring gun fired"
Stacked bar chart showing Bank of England quantitative tightening, divided by gilts maturing and gilts sold, from February 2022 until September 2029, including market expectations for future sales.
Chart showing the fall in the Bank of England's holdings of gilts since 2022 and predictions for future falls under high, median and low QT scenarios in the BoE's May Market Participants Survey
Extract of a UBS research note by Anna Titareva from 19/02/2025 explaining her new forecast for 3 more quarter-point rate cuts by the BoE this year
Chart of 10-year gilt yields over the past 6 months, with open, high, low and closing prices.
Post-2019 healthcare productivity estimates The quarterly healthcare estimates show a decline in productivity of 39.1% from Quarter 4 2019 to Quarter 2 2020, but a recovery of 33.8% from Quarter 2 2020 to Quarter 3 2024. Productivity was 18.5% lower in Quarter 3 2024 than in Quarter 4 2019. Figure 6: Health productivity in July to September 2024 is 18.5% lower than it was in October to December 2019  Index of public service productivity, inputs, and output, UK, Quarter 4 (Oct to Dec) 2019 to Quarter 3 (July to Sept) 2024 Source: Public service productivity from the Office for National Statistics
Bar chart of UK government bond issuance, by maturity, since 2010, including projections for the next 5 years.
Line graph showing percentage of annual gilt issuance between 2014-15 and 2024/25 for short, medium, long and index-linked gilts, plus a projection for 2025-26.
Bar chart of average bond government maturities in G7 and China, ranging from UK at 14.0 years to US at 5.8 years
Extract from Pantheon Macroeconomics research note, 21/05/2025: "We doubt wage growth, and especially private sector wage growth, has really suddenly accelerated as much as AWE reports for the past few months. That said, we think that AWE now more accurately reflects the underlying picture after correcting for oddly weak readings from May to August. Anecdotally last April’s minimum wage hike boosted pay for workers earning a little more than that threshold in the subsequent months, to maintain relative pay rates with the lowest paid. But AWE strangely showed pay growth slowing. Private pay growth may also be responding to the prospect of another large minimum wage hike next year, forcing firms to boost pay relatives. In any case, AWE growth is now closer to PAYE median pay gains and the Indeed wage tracker, and is running far too high for inflation to return to target soon."
Extract from an Oxford Economics research note from 21/01/2025, plus a chart of weekly earnings and a proprietary wage growth measure from 2019 to 2025. "Our regular pay indicator shows greater resilience (Chart 7). Year-on-year growth in the ONS average weekly earnings series accelerated back to 6% in late-2024. But base effects caused by a soft reading for October 2023 and compositional effects played a major role in the pickup. Our indicator has been softer, stabilising at around 4.5% at the turn of the year. This is still some way above the pace that the BoE considers to be consistent with achieving the inflation target over the medium-term. It's also slightly higher than the top of the range of potential outcomes identified recently by the BoE's regional agents. Chart 7: Our nowcast suggests pay growth has stabilised at around 4.5%"
Extract from RBC research note from 21/01/2025: "We don’t think today’s release will shift the MPC’s reading of the data. A lot of what we are seeing in pay growth at present is from base effects attributable to a 0.5% m/m fall in regular pay in October 2023; mainly due to a m/m fall in financial services. That drops out of the 3m/yr calculation from January onwards (which will be picked up in the March release from the ONS) and we would expect pay growth to ease back to around 4% 3m/yr by mid-2025."
Four charts showing UK 2-year, 5-, 10- and 30-year gilt yields since the start of 2025
Chart of 30-year gilt yields over the past 12 months
Chart of 30-year gilt yields since October 1992
Office for National Statistics table of the different categories of goods and services contributing to October's 0.6 percentage point rise in the annual CPI rate to 2.3%. "Housing, water, electricity, gas and other fuels" was the category contributing most, adding 0.59 percentage points to the rate. The most negative contributor was "recreation and culture", subtracting 0.11 percentage points.
Governor of the Bank of England Andrew Bailey delivers a speech next to British Chancellor of the Exchequer Rachel Reeves and Lord Mayor of London Alastair King at the annual Mansion House dinner in London, Britain November 14, 2024. REUTERS/Isabel Infantes/Pool
Two charts showing the rising share of services and the shrinking share of manufacturing in the UK economy, between 1998 and 2024