UK borrowing costs have jumped to their highest levels since the late 1990s as a global bond sell-off deepens. Oil prices are climbing after the US and Iran exchanged fire near the strait of Hormuz, reviving inflation fears that are pushing yields higher from London to Tokyo.
Long-dated UK gilts led the move. The 30-year gilt yield jumped nine basis points to 5.88%, its highest since March 1998. The 10-year gilt yield climbed seven basis points to 5.223%, the highest since June 2008.
Oil rally follows US-Iran clash
The bond rout tracks a fresh jump in crude. Brent crude rose 1.7% to $92.1 a barrel. US West Texas Intermediate gained 1.9% to $87.35 a barrel.
US and Iranian forces exchanged fire for the first time in a month on Monday, after missiles and drones struck Iranian rocket launchers on an island in the strait of Hormuz. Iran responded by targeting US military bases in Jordan and the United Arab Emirates. Donald Trump told Fox News: "We're going to hit them hard."
Sell-off spans Japan, Germany and the US
The move is global. Japan's 10-year government bond yield hit 3% for the first time since September 1996. Germany's 10-year yield rose two basis points to 3.34%, a fresh 15-year high. The US 10-year Treasury yield rose 2.6 basis points to 4.78%, its highest since early 2025.
Thomas Pugh, chief economist at RSM UK, pointed to competition for capital: AI firms are expected to borrow about $500bn this year to build data centres, against roughly $160bn in UK government borrowing. He said none of the pressures pushing yields up look temporary.
Higher inflation expectations are also feeding rate hike bets. Markets are pricing a rate increase in New Zealand on Wednesday, and the European Central Bank is widely expected to raise its key rates by 0.25 percentage points at its meeting on September 10. The Bank of England is not expected to move until later this year.
Source: Business | The Guardian
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