LONDON — The yield on Britain’s benchmark ten-year government bond climbed to 5.295% on 10 September, its highest level since August 2007.
The rise formed part of a broader global bond sell-off as oil prices moved above $100 a barrel. More expensive energy can sustain inflation and reduce expectations that central banks will be able to lower interest rates quickly.
Shorter-dated British borrowing costs also increased. The two-year gilt yield reached 4.742%, while the five-year yield rose to 4.828%, according to market data reported during the session.
A £5 billion auction of government bonds maturing in May 2030 nevertheless attracted bids worth about £16.2 billion. Strong demand at the auction indicated that investors remained willing to buy British debt, although at higher yields.
Higher gilt yields raise the government’s financing costs and can feed into mortgage rates and wider credit conditions. Persistent increases may also complicate fiscal planning by increasing the cost of servicing public debt.
Analysts linked the movement to both the energy shock and a broader reassessment of sovereign debt. Markets will now watch inflation data, oil prices and signals from the Bank of England for evidence of whether the pressure will persist.
Sources
- Reuters: UK ten-year gilt yield reaches 19-year high
- The Guardian: Energy prices and bond-market pressure
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