costs to a new post-financial crisis high, as investors honed in on cautious language from BoE Governor Mark Carney.
The central bank signalled it was in no hurry to raise rates again above 0.75 percent as Brexit approaches with no clear outline of Britain's future relationship with the European Union.
While Thursday's rate hike was widely expected, the fact that all nine members of the Monetary Policy Committee backed it was a surprise -- something that initially caused the pound to rise and gilt yields to jump.
But investors soon reversed course as Carney went on to emphasise that the BoE should "walk - not run" in its approach to setting policy, causing the pound and gilt yields to fall again.
The 10-year gilt yield slipped to a day's low of 1.35 percent at 1205 GMT, just as Carney was holding a press conference after the decision. As of 1302 GMT it stood at 1.37 percent, down 1.5 basis points on the day.
Short-dated yields were little changed.
"All the rhetoric coming out of Carney -- he was very guarded, cautious," Jason Simpson, fixed income strategist at Societe Generale, said.
"I think the market took the message as being fairly dovish. They're forecasting the continuation of the rate hike process, but they're whacking in some big assumptions like a smooth Brexit."
The market prices in the next interest rate hike for September 2019, based on the sterling overnight index average (SONIA) curve, Simpson said.
The yield spread between 10-year British and German government bonds stood at 90.7 basis points, little changed on the day.