Gilt yields near 27-year high

Jitters about rising prices and the government’s finances push up the yield on 30-year UK government bonds ahead of inflation data

Borrowing costs rise again as gilt yields near 27-year high

Thirty-year gilt yields climbed to 5.61% on Monday, up 0.05 percentage points and nearing a 27-year high. The move reflects ongoing concerns about the government’s borrowing needs and stubborn inflation, with traders betting that the Bank of England will keep rates higher for longer after the August 7 decision to cut the base rate to 4%. Long-term borrowing costs are now almost 1 percentage point higher than during the October 2022 market turmoil tied to Liz Truss.

The rise comes as investors weigh the path of inflation, fiscal policy and the potential impact on public finances. Monday’s level was within striking distance of peaks reached in past political and policy shocks, underscoring how sentiment and policy signals can drive long-dated yields even when the near term looks stable.

The gilt market is airing worries about debt affordability and macro stability. Higher long-term yields increase the cost of servicing the national debt and can influence pension fund valuations and insurers that hold large gilt portfolios. That, in turn, constrains public spending choices and raises questions for future policy. Politically sensitive moments like this test both credibility and resilience as markets demand more clarity on inflation prospects and fiscal strategy.

Looking ahead, the central interplay will be inflation data and the BoE’s stance. If inflation proves stubborn, higher yields could persist and widen gaps between market expectations and policy plans. The risk is that sustained pressure on debt costs feeds public criticism and complicates fiscal management at a time when growth remains uneven.

Highlights

Bond markets are quietly testing the strength of the economic repair effort.