UK 30-Year Gilt Yields Hit 26-Year High Amid Global Debt Sell-Off
Japanese bond yields also surge as Middle East tensions and inflation fears drive up borrowing costs worldwide.
Callum Smith
UK government bond yields surged to their highest level since March 1998 on Tuesday.
This global uptick links directly to escalating tensions in the Middle East, alongside mounting concerns that inflation could accelerate in the coming months.
Such acceleration could force central banks to lift their interest rates.
Brent crude trades at $91.69 a barrel.
The United Kingdom Maritime Trade Operations agency confirmed a tanker was struck by three projectiles while sailing out of the Strait of Hormuz.
The US and Iran exchanged fire for the first time in a month on Monday, further escalating regional tensions.
Iran has effectively closed the vital waterway since the US and Israel initiated attacks on Tehran on February 28.
Elsewhere, inflation in Germany picked up in August to 2.9%, adding to the global picture of rising prices.
The EU intends to phase out its €3 duty on small parcels imported from outside the trading bloc.
For the UK, government borrowing costs have risen to the highest since 2008, with the market closed for the bank holiday yesterday.
Higher rates on these bonds will mean that it costs Mr. Burnham and Chancellor John Healey more to borrow money, straining public finances.
The Bank of England is not expected to move until later this year, with markets pricing in a quarter-point rate hike to 4% around November or December.
Finance ministers and central bankers from the G20 are currently meeting in North Carolina to discuss the volatile global economic landscape.
With the bad news in the price, there is a limitation to how much further bond yields can keep climbing.
Oliver Faizallah stated, "While elevated bond yields are warranted given the inflationary and fiscal risks that are very clear and present, I also believe that the recent sell-off is fully pricing in these risks."
Faizallah added, "As it stands, bond yields are priced for higher and prolonged second round inflation, consequent central bank hikes, and further government spending driven by an increase in bond sales."
He concluded, "With the bad news in the price, there is a limitation to how much further bond yields can keep climbing."