UK bond yields hit 18-year high, government set to raise taxes and cut spending by £11 billion

Money & Banking··GB·Read original
4▲2 ▼1Impact / 5
Summary · why it matters

The yield on 10-year UK government bonds has surged to 5.268%, the highest level since 2008, or in over 18 years. This may force the UK government to raise taxes or reduce spending by approximately £11 billion per year to restore its significantly diminished fiscal headroom. Economists at Pantheon Macroeconomics estimate that the government's fiscal headroom has fallen to just around £13 billion, down from £23.6 billion, after bond yields surged amid a global sell-off in bonds, driven by concerns over inflation stemming from the Iran war and higher oil prices. The rise in borrowing costs comes as the government, led by Prime Minister Andy Burnham and Chancellor of the Exchequer John Healey, prepares to deliver its first budget on October 28. The 5-year bond yield has also climbed to 4.7534%, the highest since October 2023.

Impact on assets 3

Others▲
％UK Government Bond 10Y
GB-10Y
▲ PositiveMonetaryrelevance

Bond yields surge to 18-year high due to global sell-off and inflation concerns, directly raising the yield.

Others▼