UK government bonds extended their decline as traders increased their expectations for interest rate hikes from the Bank of England. This shift followed the release of stronger-than-anticipated Purchasing Managers' Index data from the UK. Market risk sentiment deteriorated in the afternoon session, boosting demand for bonds as tensions escalated in the Strait of Hormuz. Traders are now pricing in 55 basis points of interest rate increases from the Bank of England by the end of the year. This represents an increase of 4 basis points compared to the expectations priced in at Wednesday's close. Earlier in the week, market participants had anticipated only a single rate hike. Meanwhile, Brent crude oil saw a modest increase, trading around $103 per barrel. The yield on the two-year UK gilt rose by 3 basis points to reach 4.37%. During the session, it had climbed by as much as 7 basis points at its peak. In contrast, German government bonds were poised to finish the day largely unchanged. Money markets slightly pared back their expectations for European Central Bank rate hikes after data showed an unexpected contraction in eurozone business activity, creating a divergence from the UK's trend.

Market Snapshot: * The yield on the 10-year German bund fell by 1 basis point to 3.00%. * German bond futures declined by 9.00 points to 125.62%. * The yield on the 10-year Italian government bond was essentially flat at 3.78%. * The yield spread between Italian and German bonds widened by 1 basis point to 78 basis points. * The yield on the 10-year French government bond remained largely unchanged at 3.65%. * The yield on the 10-year UK gilt increased by 1 basis point to 4.91%.