National Grid shares continued their upward momentum on Friday, closing at 1,285 pence for a gain of 0.23%. This marks the sixth straight session of advances, with the stock trading close to its 52-week peak. Trading volume was notable, with 6.51 million shares changing hands during the session.
Interest Rate Outlook Drives Sentiment
The rally in the utility sector is largely attributed to shifting expectations for monetary policy. A recent Bank of England survey indicated that investors anticipate the Bank Rate could decline to 3.0% by March 2027, down from the current 3.75%. As a capital-intensive business that relies on borrowing for major infrastructure projects, National Grid is particularly sensitive to changes in bond yields. Lower yields generally enhance the appeal of its dividend to income-focused investors.
National Grid's operational update highlighted the performance of its IFA2 electricity interconnector, which has supplied power equivalent to over 1.6 million UK households annually since its 2021 launch. The company noted an upcoming five-year review of the project under a regulatory 'cap-and-floor' return mechanism.
Key Data and Risks Ahead
Market attention now turns to a series of UK economic releases scheduled for February 12, including monthly and quarterly GDP figures, industrial production, and trade data. These reports will be crucial for gauging the health of the economy and their potential impact on gilt yields and utility stocks.
While the current environment is favorable, analysts caution that utility stocks like National Grid remain vulnerable to sudden spikes in government bond yields, which could pressure valuations irrespective of operational performance. The company is scheduled to release its full-year results for the 2025/26 period on May 14.
