Overview
- UK long‑dated gilts, which jumped Tuesday to about 5.8% on 30‑year bonds and above 5% on 10‑year notes, left borrowing costs near peaks last seen in 1998 and 2008.
- Most of the rise reflects inflation worries linked to the Iran energy shock, with analysts saying political uncertainty has added only a smaller risk premium.
- Pressure on Keir Starmer’s leadership has coincided with the sell‑off, and investors warn that loosening fiscal rules under any successor could prompt a Truss‑style hit to gilts, the pound and home‑loan costs.
- Higher yields lift the government’s interest bill and could trim Chancellor Rachel Reeves’ fiscal headroom by roughly £6bn before the Budget, while brokers say lenders may raise mortgage rates if the move persists.
- Bank of England policymaker Catherine Mann cautioned that a bigger role for foreign buyers makes gilts more vulnerable to sharp sell‑offs, even as Standard Life has been adding longer‑dated bonds at cheaper prices.