The yield on UK 30-year government bonds surged to 5.89% in early September, up 10 basis points in a single session and the highest level since March 1998. Effective long-term borrowing costs are now knocking on the door of 6%, a number that would have seemed absurd just a few years ago when governments across the developed world were borrowing at historically negligible rates.
Ten-year gilt yields also climbed sharply, approaching or exceeding 5.2%.
What’s driving the sell-off
The proximate cause is global rather than purely British. Escalating tensions in the Middle East involving Iran have pushed oil prices higher, reigniting inflation concerns. When energy costs spike, central banks face pressure to keep monetary policy tight or tighten further, which in turn makes existing bonds less attractive and drives their yields up.
This dynamic is playing out across borders. US Treasuries, German bunds, and Japanese government bonds have all experienced similar yield increases, suggesting a coordinated repricing of long-duration debt worldwide.
