Historic High for UK Gilt Yields

The United Kingdom's government bonds, known as gilts, experienced a significant surge in yields on Tuesday, with the 30-year yield reaching its highest point in 27 years. This increase comes as the country prepares for an auction of bonds with the same maturity.

Budget Plan Fuels Yield Rise

The proposed budget by Chancellor of the Exchequer Rachel Reeves, which includes a record bond selloff, has been a major factor in the rising yields. The Labour government plans to auction £297 billion worth of gilts in the 2024-2025 fiscal year, further influencing the market.

Economic Recovery Boosts Confidence

Optimism about the UK's economic recovery has also played a role in bolstering long-term bond yields. A recent report indicating expansion in both the manufacturing and services sectors at the end of 2024 has reinforced this positive outlook, despite a slower pace of growth.

At 10:28 am CET, the 30-year gilt yield increased by 2.5 basis points to 5.207%, while the two-year gilt yield rose by 2.1 basis points to 4.454%. Similarly, the 10-year gilt yield saw an increase of 2.6 basis points, reaching 4.638%.