The rise in yields in the final quarter of last year was larger than that seen at the start of the GFC. While the magnitude of the rise can be explained by the jump in risk-free interest rates, the speed of the repricing has been a surprise. The surge in yields last year should mean the increase in 2023 is more modest at 30 to 40bps. That said, even with market interest rates falling back, we still expect the 10-year gilt yield to end this year 265bps above its 2020 low. The risks to our yield forecast therefore lie firmly to the upside.
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