On November 6, 2024, yields on U.K. government bonds, particularly 30-year Treasury gilts, reached their highest levels in nearly 30 years, marking a significant rise in borrowing costs. The yield on the 30-year gilt rose to 5.212% following an auction that offered £2.25 billion worth of bonds at an initial yield of 4.375%. Shorter-term gilt yields also increased, reflecting concerns about the U.K. economy, which contracted by 0.1% in October and faced inflation above the Bank of England’s target at 2.6%. Market uncertainties were amplified by potential U.S. inflationary pressures under President-elect Donald Trump’s tariff plans, alongside domestic worries about the Labour government’s fiscal policies, including plans for substantial tax hikes. These developments contributed to a decline in business confidence, driven by fears related to rising tax burdens and stagnant economic growth. Analysts pointed out that rising gilt yields could deter investor interest and further exacerbate fears about public finances. Despite the challenges, long-term investors may find current gilt yields attractive compared to inflation expectations, with short-dated gilts also noted as a viable investment option for those with lower risk tolerance.
