British government 30-year borrowing rates reach their highest level since 1998, at 5.218%. This increase comes against a backdrop of global economic uncertainties and national tax policies, fueling investor fears.
Yields on 30-year British Treasury bonds, or “gilts”, reached 5.218% on Tuesday, the highest since August 1998. The spike reflects ongoing economic tensions and investor concerns, exacerbated by inflation and fiscal policies. in progress.
A worrying global and local context
The rise in British rates takes place in an international context marked by expectations surrounding the policies of US President-elect Donald Trump. These policies, perceived as inflationary on a global scale, are driving investors away from bonds, favoring the strengthening of the dollar, explains Susannah Streeter, analyst at Hargreaves Lansdown.
In the United Kingdom, concerns are particularly acute in the face of inflation which remains high, reaching 2.6% in November, and stagnant economic growth. The country’s gross domestic product (GDP) remained unchanged in the third quarter, adding to the uncertainty.
Fiscal policies under pressure
Finance Minister Rachel Reeves presented an ambitious budget in October, including tax rises and increased use of borrowing to finance investment. Although necessary, these measures mechanically increase bond yields, as Russ Mould, analyst at AJ Bell, points out. Additionally, investors doubt the ability of these infrastructure investments to generate long-term sustainable growth. This uncertainty weighs on the markets’ appetite for British public debt, worsening the situation.
Lessons from the past in a global context
This new episode of rising rates is reminiscent of the turbulence of 2022, when Liz Truss’ government caused a financial crisis with an unfunded budget. If the Bank of England had then succeeded in stabilizing the markets, the current increase in yields, although more gradual, remains worrying. The situation is not unique to the United Kingdom. Long-term borrowing rates in France, Germany and the United States are also seeing increases, reflecting widespread stress in bond markets.
Uncertain outlook
With rates reaching historic highs, the UK’s ability to navigate a complex economic environment remains under scrutiny. The budgetary and monetary decisions of the coming months will be decisive in restoring investor confidence while stimulating an economy in search of sustainable growth.
Sami Nemli with agencies / Les Inspirations ECO
