Recent increases in the UK government’s cost of borrowing have sparked debates about the public finances and the direction of economic policy. Some analysts have made misleading comparisons to the adverse bond market reactions to the previous government’s mini-budget of 2022.
The UK government’s cost of borrowing has been rising gradually since late 2024. That cost is measured in gilt yields, which give an indication of the return that an investor might expect from buying the gilt and holding it to maturity (UK Debt Management Office).
Ten-year gilt yields rose from 3.9% in September 2024 to 4.4% in December 2024. This was followed by large fluctuations in January 2025, reaching a high of 4.9% before coming back to just over 4.5% today.
Such increases are not unique to the UK, but part of a global trend that is partly led by rising bond yields in the United States. Bond yields are the annual returns on bond investments, expressed as a proportion of the bond price.
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