Why have Britain’s bond yields jumped sharply?
Subscribe to enjoy similar stories. The new year has brought a head-splitting hangover for Britain’s government. Gilts—British government bonds—have sold off sharply in the first days of 2025, deepening a rout that has been going on for months.
By January 9th 30-year yields had climbed to 5.45%, the highest in nearly three decades. Ten-year yields were at 4.82%, the most since the financial crisis of 2007-09. Worsening the headache, sterling has tumbled too.
That is a rare and toxic mix. In rich countries, bond yields and currencies mostly rise and fall together; juicier yields should lure foreign capital in. Opposing moves are usually a hallmark of emerging markets, where jumpy investors tend to scuttle away at the first sign of trouble.
Outside Liz Truss’s brief premiership and calamitous mini-budget in 2022, Britain has rarely seen the past month’s pattern of rising gilt yields and a steep drop in the pound. The Labour Party won last July’s election after a campaign that missed few opportunities to remind voters of Ms Truss’s 49 disastrous days in Downing Street. Any similarities to her sorry tenure will cause shivers for Labour.
The Conservatives have relished the role-reversal; Mel Stride, the shadow chancellor, has accused Labour of “driv[ing] the economy into a ditch". In a surreal turn, Ms Truss has sent Sir Keir Starmer a cease-and-desist letter, threatening legal action if the prime minister continues to accuse her of “crashing the economy". But unlike October 2022, when Britain’s bond woes were entirely home-grown, today they are mostly imported from America.
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