U.K. Gilt Yields Hit Multidecade Highs Amid Inflation Fears, Fiscal Worries — Update

By Miriam Mukuru

Yields on 30-year U.K. government bonds, or gilts, rose on Monday to their highest since 1998, while 10-year borrowing costs reached their highest since 2007, due to inflation fears as oil prices climbed further.

Investors significantly increased their expectations of Bank of England interest-rate hikes in the coming months as a result. Concerns about high levels of government borrowing also weighed on long-dated gilt yields ahead of the Oct. 28 budget.

Brent crude oil prices jumped 4.4% to $108.96 a barrel as the conflict in the Middle East widened. Last week, Iran-backed Houthi militants seized key territory around the Bab al-Mandeb Strait, an important route for Saudi Arabia's oil exports, threatening further disruptions to global energy supply.

Thirty-year gilt yields rose more than two basis points to a high of 5.951%, LSEG data showed. Ten-year gilt yields climbed to a peak of 5.426%.

Yields on two-year gilts also jumped around 13 basis points to reach their highest since 2023 at 4.965%, according to LSEG.

Traders fear that oil prices could remain elevated, keeping inflation high over the long-term.

The BOE is expected to keep interest rates on hold when it announces its decision Thursday. However, markets have fully priced in a total of four U.K. interest-rate rises by April 2027, a substantial increase from the two rises priced in a week ago, LSEG data show.

U.K. fiscal uncertainty ahead of the budget is also contributing to rising gilt yields.

Weak public finances and rising spending needs could push the government to issue more debt, amid already elevated levels of public borrowing.

"The autumn budget may generate further volatility in gilts," said Stefan Koopman, senior macro strategist at Rabobank in a note.

The U.K. government's outstanding debts total close to 94% of annual economic output , and economists expect the budget deficit to be around 4% of gross domestic product in the current fiscal year.

"Conjuring up a budget which shows enough fiscal restraint to avoid scaring the gilt market…will take some doing," Societe Generale chief forex strategist Kit Juckes said in a note.

Gilt yields are rising in line with global peers as developed-market bond yields reach multiyear highs.

Factors pushing yields higher include inflation worries due to the war in the Middle East, resilient economic data and abundant bond supply coming from both governments and companies, Francesco Maria Di Bella, rates strategist at The Investment Institute by UniCredit, said in a note.

Write to Miriam Mukuru at miriam.mukuru@wsj.com

(END) Dow Jones Newswires

September 14, 2026 10:52 ET (14:52 GMT)