- On Tuesday, the UK’s bond yield reached levels not seen since the global financial crises.
- The yield of the 2-year gilt rose to 4.761%, which is the highest since 2008.
- In the meantime, the UK’s 30-year yields on bonds topped 5% for first time since 2007.
As economic uncertainty and Britain’s pound crash continued to plague Britain, yields on UK bonds increased on Tuesday. They reached their highest level in 14 years.
The yield on the two-year gilt jumped to 4.761%, the highest since 2008. This is an increase of about 4.5% from Monday.
In the meantime, the yield on the UK five-year gilts was at a fourteen-year high. The 30-year bond yields were also at a record 5%, for the first time since 2007. The spread between 5- and 30-year yields has been the largest since 1997.
After the sterling fell to an all-time low against US dollars on Monday, the moves were made.
British debt and the pound fell after the UK’s new chancellor described a series of tax cuts that could be implemented, and hinted at more. Investors Fear the cuts would not only increase government debt but also fuel inflation, spurring the Bank of England to hike interest rates more aggressively and potentially drag the UK economy into a deep recession.
The Bank of England is expected to tighten the benchmark rate to 6.25 percent, which will be the highest since 2001. Money markets now anticipate this.
Monday The yield on UK 5-year giltsThese have surpassed those of Italy and Greece. This means that markets perceive more risk in the UK’s medium-term gilt, than equivalent bonds for the most indebted countries of the eurozone.
At July 31, Greece’s debt-to-GDP ratio was 189.3%, while Italy’s was at 152.6%. These are the highest two currencies in the union. In July, the UK’s ratio was 99.6%.
