UK 30-year gilt yields hit 28-year high in global selloff

UK 30-Year Gilt Yields Reach Highest Level Since 1998 in Global Selloff

Surge in UK Gilt Yields Amid Global Bond Market Turmoil

By David Milliken

Record-High Yields and Market Reactions

LONDON, Oct 7 (Reuters) - British 30-year bond yields rose to a 28-year high on Wednesday as a global bond selloff pushed equivalent US borrowing costs to their highest since 2002, adding to pressure on finance minister John Healey before his first budget in three weeks' time.

Yields on 30-year gilts – once a major part of UK debt issuance – jumped 13 basis points on the day to peak at 6.036% at 1341 GMT, their highest since January 1998 and pushing past a previous record set on October 1.

Yields on 20-year gilts were a whisker away from a similar record and 30-year yields were on course for their biggest daily rise since August 14.

Global Factors Driving the Selloff

Inflation and high levels of government borrowing remain a big worry for bond investors globally, exacerbated on Wednesday as oil prices, inflamed by the US-Israeli war against Iran, rose further above $100 a barrel.

Government Response and Fiscal Policy Outlook

Finance Minister's Engagement with Economists

Wednesday's move in gilts comes the day after finance minister John Healey met economists employed by primary dealers – also known as gilt-edged market makers or GEMMs – to gauge market sentiment ahead of his first budget on October 28.

Emphasis on Fiscal Credibility

"He emphasised the importance of fiscal credibility in a challenging global economic environment, reaffirming the government's commitment to the fiscal rules and its focus on delivering economic stability, growth and jobs," Britain's finance ministry said in a statement on Wednesday.

Forecasts for Borrowing and Budget Goals

Economists at Bank of America on Tuesday forecast that Healey's budget would lead to £15 billion ($19.9 billion) increases in public borrowing in both the current financial year and 2027/28, and to less leeway to hit longer-term budget goals.

Comparisons with US Treasuries and Yield Trends

The selloff in gilts – whose prices move opposite to yields – was somewhat sharper than for US Treasuries, as is normal when there are big moves.

Thirty-year Treasury yields were 7 bps up on the day while 10-year Treasuries were 6 bps higher , compared with a 10 bp rise in Britain's 10-year gilt to 5.48%.

Ten-year gilt yields are more representative of the cost of new government borrowing, and are just short of their highest since 2007.

Exchange Rate Information

($1 = 0.7545 pounds)

(Reporting by David Milliken)