Government borrowing costs have risen to the highest level since the global financial crisis as the bond sell-off has intensified.
Yields on ten-year gilts rose to around 4.8% yesterday (8 January) – comfortably exceeding the 4.3% seen during the liability-driven investment crisis in 2022 and one that had not previously been seen since the beginning of 2008.
The yield on the 30-year gilt has risen to its highest level since 1998 – touching 5.4% this afternoon.
Quilter Cheviot head of fixed interest Richard Carter said the surge in yields was "bad news" for the government as it "stoked fears about the state of public finances".
Despite this, he said the surge was a global one, driven partially by the US presidential election.
Carter explained: "This spike can be partly attributed to Donald Trump's victory in the US presidential election, as his policies on tax and immigration are expected to drive inflation, leading to rising yields in the US and, consequently, in the UK as well.
"The Bank of England (BoE) remains cautious about slashing interest rates too aggressively, and the tepid demand from investors at the latest gilt sale underscores the uncertainty in the market. The short-term outlook is particularly unpredictable as we approach Trump's inauguration, adding to the volatility."
He added: "Despite this turbulence, gilt yields still present an attractive opportunity for long-term investors. Currently, they are well above expected inflation levels, making them a viable option for those looking to secure returns in a sluggish economy that might prompt further rate cuts by the BoE."
