UK two-year gilt yields rise to highest since Nov. 1

LONDON: Two-year British government bond yields rose to their highest in almost eight months on Wednesday, as British gilt prices fell broadly, tracking declines in German bonds.

Euro zone debt prices fell heavily for a second straight day on Wednesday on expectations that the European Central Bank will announce a reduction of stimulus as soon as September, and gilts followed suit.

Rate-sensitive two-year yields rose 2 basis points to peak at 0.288 percent at 0714 GMT, the highest since Nov. 1, while five-year yields rose 3 basis points to 0.588 percent. Benchmark 10-year yields gained more than 4 basis points to touch a fresh six-week high of 1.138 percent.

RBC said financial markets priced in a more than 90 percent chance of a Bank of England rate hike by August 2018, up from about 80 percent last week when BoE chief economist Andy Haldane said he expected to back a rate rise later this year.

"With the economic and political backdrop remaining quite uncertain, we think this re-pricing in the short-end looks rather optimistic," RBC's strategists said in a note to clients.

Many economists think the BoE may be further from raising rates than the most recent 5-3 split on its Monetary Policy Committee suggests.

Earlier on Wednesday BoE deputy governor Jon Cunliffe sided with governor Mark Carney in saying he would need more time to assess if it was appropriate to lift British benchmark rates of their record low 0.25 percent.