Bloomberg Daybreak: Europe Edition BONUS EPISODE: UK 30-Year Bond Yields Hit 1998 High - What Now?
Sep 2, 2025
Marcus Ashworth, a Bloomberg Opinion columnist, and Dan Hanson, Chief UK Economist at Bloomberg, delve into the implications of soaring UK 30-year bond yields, reaching highs not seen since 1998. They discuss the urgent need for the government to regain market confidence ahead of an important budget, exploring how political instability affects bond markets. The duo also examines the Chancellor's fiscal strategies and the importance of communication amid potential pre-budget announcements, navigating the uncertain landscape of UK economics.
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Global Forces Behind Gilt Sell-Off
- Global long-end yield moves, especially in the US, are driving UK 30-year gilt yields higher and not solely a UK fiscal crisis.
- Dealers hedging ahead of big syndicated sales and weak long-end demand amplify gilt sell-offs.
30-Year Yield Isn’t Full Fiscal Picture
- The DMO is issuing more short-dated debt, so 30-year yields are a poor single gauge of fiscal headroom.
- A rough back-of-envelope move in yields could cut Chancellor headroom from £10bn to about £2bn.
Build Credible Fiscal Headroom
- Chancellor should aim to rebuild credible fiscal headroom ahead of the budget to calm markets.
- Even signalling intent to move toward historic averages of headroom can improve market confidence.