Overview
- The 10-year gilt yield pushed to around 5% on Friday, the highest since 2008, with two-year yields above 4.5% as the UK bond market sold off more sharply than key European peers.
- Official data showed public sector borrowing at £14.3 billion in February, driven by a record £13 billion debt interest bill linked to RPI‑indexed gilts and payment timing effects.
- The Bank of England kept rates on hold but signalled it stands ready to tighten, and markets have largely priced out cuts this year with pricing pointing to rates of about 4.25%–4.5% by year‑end.
- Rising yields are eroding fiscal headroom, with analysts estimating a multibillion‑pound squeeze that heightens pressure on Rachel Reeves over potential energy support, tax measures, or spending choices.
- Forecasters cut UK growth and raised inflation projections, with Oxford Economics flagging a potential 19% rise in the Ofgem price cap from July as higher oil and gas costs feed through to bills.