Shafaqna English– British government bond yields surged to fresh 18-year highs on Wednesday, driven by a global sell-off following renewed escalation in the Iran war, compounding fiscal pressures on finance minister John Healey ahead of his first budget on October 28.
The 10-year gilt yield climbed to 5.268%, its highest since June 2008, adding to a 15-basis-point rise on Tuesday, while five-year yields also hit their highest since October 2023. The increase, which mirrors rising borrowing costs across Europe, reflects investor anxiety over inflation from higher oil prices amid Gulf conflict.
According to Pantheon Macroeconomics, the yield spike has slashed the government’s fiscal headroom from £23.6 billion in the Spring Statement to approximately £13 billion ($18 billion), requiring Healey to either raise taxes or cut spending by about £11 billion annually just to restore the previous margin.
With markets on edge and continued spending commitments, analysts warn the budget presents a significant challenge for Prime Minister Andy Burnham’s new government.
Source: Reuters