Government bond yields are easing up a bit, providing some relief to the UK Chancellor, Rachel Reeves. The yield on the 30-year gilt has decreased by 2 basis points to 5.407%. Just yesterday, it rose to 5.472%, a level not seen since 1998, due to a sell-off of UK government bonds. When bond prices rise, yields typically fall, making this fluctuation notable.
The 10-year gilt yield also saw a minor decrease of nearly 3 basis points, settling at 4.846%. This trend matches a similar drop in bond yields across the eurozone, particularly in Italy, Portugal, and Greece. Meanwhile, Germany, which has the eurozone’s key 10-year yield, saw a slight reduction to 2.579%, following a peak of 2.612% yesterday.
In the US, Treasury yields fell in Asian trading, with analysts at Deutsche Bank noting a decline that started late in the previous US trading session.
Despite this easing, things aren’t looking too rosy for Chancellor Reeves, as government bond yields remain high, near levels not seen in years. Analysts like Jim Reid from Deutsche Bank pointed out that the UK has faced significant losses lately, with a particular focus on US Treasuries, which are crucial in the global market.
Reid noted, “The UK has seen some of the most severe losses across multiple asset classes. Just yesterday, the 10-year gilt yield reached a post-2008 high of 4.88%.”
The situation underlines that rising yields create pressure on the government, making it harder to stick to fiscal rules without introducing new tax hikes or cutting spending.
Overall, while there is some easing in government borrowing costs, the high yields continue to pose challenges for UK financial stability.
