The Bank of England kept interest rates unchanged at 3.75% on Thursday, with seven of nine MPC members supporting the hold while two voted for an increase. Governor Andrew Bailey expressed satisfaction with current policy but acknowledged persistent inflation risks. Two-year gilt yields edged down to 4.209% from 4.216%, while 10-year yields fell to 4.768%.

Across the Atlantic, the Federal Reserve signaled a more hawkish stance despite maintaining rates, lifting short-term Treasury yields while long-dated bonds slipped. The dollar index climbed to an 11-week high of 100.631. An interim U.S.-Iran agreement signed Wednesday helped improve geopolitical sentiment, though analysts note gains may be capped.

Eurozone bonds opened lower, tracking the U.S. move, as the German 10-year Bund yield slipped 1.5 basis points to 2.927%. Heavy supply looms Thursday with 21.5 billion euros in auctions from Spain and France across maturities from 2032 to 2040.

Japanese government bonds fell in Tokyo trade after the Fed's hawkish dot plot showed increased tightening expectations. Ten-year JGB yields rose 2.5 basis points to 2.625%. The market reaction reflects growing conviction that rate cuts may be delayed amid sticky inflation pressures.