Gilts have enjoyed a surprisingly calm June despite a year‑to‑date narrative of weakness. Total‑return data for a broad UK gilts basket shows a modest dip, far milder than the 2022 sell‑off, and the 30‑year yield has slipped about 0.4 percentage points from its mid‑May peak of 5.18%.

The rally stems from two sources: the Iran nuclear agreement, which eased geopolitical risk, and a string of soft UK data – output fell 0.1% in April, May inflation eased to 2.8%, and labour market slack widened. Consequently the Bank of England left rates at 3.75% and trimmed market expectations for two further hikes to just one.

Political uncertainty lingered after the Makerfield by‑election, where Andy Burnham’s potential rise raised gilt risk premiums. Analysts at JPMorgan argue that if Burnham respects existing fiscal rules, yields could fall another half‑percentage point, turning gilts into a relative beneficiary of the Iran deal. Absent further shocks, the bond market now rewards the modest upside.

For investors, the key takeaway is that gilt volatility has receded, but the underlying fiscal strain remains. With roughly a quarter of UK debt indexed to inflation, any uptick in price growth would quickly push borrowing costs higher. Monitoring upcoming labour and CPI releases will be essential to gauge whether the current reprieve can be sustained.