LONDON, Dec 29 (Reuters) - Britain's 10-year bond yield was on track for its biggest monthly fall in 15 years on Friday, even as yields rose on the final trading day of the year.
The 10-year Gilt yield has fallen 61 basis points (bps) in December, the most since late 2008, when the Bank of England was cutting interest rates during the financial crisis. Yields move inversely to prices.
Longer-dated yields rose on Friday as investors took some profits before the start of the year after a two-month rally. The 10-year yield was up 7 bps at 3.568%, from a nine-month low of 3.433% the previous day.
The two-year Gilt yield, which is more sensitive to interest rate expectations, was last down 2 bps at 3.993%. It hit a seven-month low of 3.96% the previous day.
It has fallen 60 bps in December, putting it on track for the biggest monthly fall since the recovery from the UK budget crisis in October 2022.
Investors' rising expectations that the Bank of England (BoE) will slash interest rates from the current 5.25% has powered the bond market rally in December and November.
At the heart of those bets has been a quicker than expected slowdown inflation in the United States, euro zone and Britain. UK price growth slowed to 3.9% year-on-year in November, lower than analysts predicted and down from 4.6% in October.
Investors expect the BoE to cut rates by almost 150 bps next year, starting in May, according to money market pricing. (Reporting by Harry Robertson Editing by Mark Potter)
