The UK 10-year gilt yield extended its decline below the 4.5% mark, reaching its lowest level since July 1, as investors reacted to weaker-than-expected inflation data. Headline inflation held steady at 3.8% in September, defying forecasts of an increase to 4%, with food price growth finally easing. Meanwhile, the core inflation rate slipped to 3.5%, also below expectations of 3.7%. Although inflation remains nearly double the Bank of England’s 2% target, the figures offered some relief for Chancellor Rachel Reeves. Last week, she signaled plans to unveil “a range of policies” in her November 26 budget aimed at “bearing down on some of the costs that people face.” Government borrowing reached 99.8 billion GBP in the first half of the fiscal year - 7.2 billion GBP above the OBR’s forecast. Looking ahead, markets expect the BoE to begin cutting interest rates early next year, following Governor Andrew Bailey’s remarks highlighting a softening labor market and a rise in unemployment to 4.8%.