A flood of gilt sales is driving up the UK government’s borrowing costs, investors say, as markets are asked to absorb record volumes of bonds without the Bank of England stepping in to hoover up supply.
Bond yields in most large economies have shot up over the past 18 months as soaring inflation drove a slew of aggressive interest rate rises, reflecting a decrease in prices. But they have remained stubbornly high in the UK even while dropping back elsewhere.
By November last year, gilt prices had recovered from the turmoil sparked by September’s disastrous “mini” Budget, but in recent months yields have drifted back up. Benchmark 10-year UK gilts currently yield 3.69 per cent, compared with 3.36 per cent on equivalent US Treasuries and 2.19 per cent on German Bunds. Until this year, US bonds typically traded with higher yields.