UK 30-year gilt yields hit 1998 highs, pressuring Reeves before budget

Britain's long-term borrowing costs surged to their highest level in nearly three decades on Tuesday, as 30-year gilt yields jumped to roughly 5.68 to 5.70 percent, intensifying pressure on Chancellor Rachel Reeves ahead of the autumn budget and knocking the pound lower. The spike, which pushed yields to levels not seen since 1998, came amid a global selloff in long-dated government bonds and rising unease about fiscal sustainability.

Analysts and economists said several factors combined to push long-term yields higher. Market nervousness over government spending and weakening investor confidence in fiscal discipline has been amplified by a broader repricing of long-term inflation expectations, while moves by central banks to unwind pandemic-era bond holdings have increased supply of long-dated debt. The immediate effect was felt in sterling, which fell about 1 percent to near $1.34 and about 0.6 percent to around 1.15 euros, and in a flight to safe-haven assets, with precious metals rising sharply.

Thomas Pugh, chief economist at RSM, noted the divergence between short- and long-term yields, explaining that short-dated yields are closely anchored to central bank base rates...