WILL THE BOE ADOPT A RESTRICTIVE MONETARY POLICY AS EARLY AS JUNE? 3/3

The UK bond market came under severe pressure as consumer inflation expectations surged to +4%, forcing the 10-year Gilt yield to climb and stabilize around 5.0%. Simultaneously, the policy-sensitive 2-year Gilt yield reached 4.4% as investors priced in an aggressive "higher for longer" Bank of England stance and heavy sovereign debt issuance. This rapid rise in real yields is driving up government borrowing costs and eroding domestic financial asset valuations. High-yield refinancing costs are plateauing at 7.5%, lifting projected default rates to 4.2% by year-end.