We explore the drivers behind the recent rise in yields, and what this might mean for the UK’s economic and public finances outlook.
The turn of the year has seen a sharp increase in the cost of borrowing UK sovereign debt, as investors sought to offload government bonds (or “gilts”). As of Thursday 9 January, 10-year gilt yields stood at their highest since mid-2008, when the global financial crisis was intensifying, and the yield on longer-dated 30-year debt rose to its highest since 1998. This was accompanied by a sharp fall in sterling, which hit its lowest level against the US dollar in over a year. The simultaneous sell-off in both gilts and the pound echoed developments immediately after the “mini” Budget in 2022, and has prompted concerns over a broader souring in sentiment towards UK assets.
Concerns over growth, inflation and the public finances outlook have pushed yields higher…
The recent move up in gilt yields seemingly reflects ongoing concerns around the scale of fiscal loosening in the government’s last Budget in October 2024 – accelerating a drift
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