Britain’s long-term borrowing costs surged to their highest level in nearly three decades on Tuesday, underlining the scale of the fiscal challenge facing Chancellor Rachel Reeves ahead of her autumn budget.
The yield on 30-year gilts climbed to 5.747% in early trading, surpassing the 5.723% peak hit on Monday. The move marks the highest level since 1998 and extends a global sell-off in long-dated government bonds.
Yields on 10-year gilts — the more widely watched benchmark for government borrowing — also rose to their highest level since January.
The rise in gilt yields, which move inversely to prices, reflects growing investor concern about the sustainability of the UK’s public finances. Reeves is preparing her 26 November budget with an estimated £40bn fiscal hole to fill.
Thomas Pugh, chief economist at consultancy RSM UK, said Britain risks sliding towards a “debt trap”, where the interest rate on government debt exceeds the economy’s nominal growth rate.
“The UK economy is likely to grow by 3.5–4% a year in cash terms over the next few years. But the average interest rate on government debt is about 3.9%,” Pugh warned. “That leaves very little room for error. If Chancellor Reeves loosens the fiscal rules, markets are likely to push gilt yields even higher.”
Even so, he dismissed predictions of a 1970s-style crash and IMF bailout, noting that the UK still has the second-lowest debt-to-GDP ratio in the G7.
Analysts said the rise was part of a broader shift across global markets. Fred Repton of Neuberger Berman pointed to a surge in debt issuance as markets reopened after the US Labour Day holiday.
“Yesterday was the largest issuance day on record in Europe,” Repton said. “For the UK, the gilt syndication and today’s linker sale represent the largest sovereign issuance ever. It has caused turbulence, but one day does not make a trend.”
David Roberts of Nedgroup Investments rejected suggestions of a “buyers’ strike” in UK debt. “The UK sold £14bn of gilts yesterday, met with record demand of £150bn,” he said. “Across Europe and the US, issuance also hit records. The numbers show extraordinary demand, not the opposite.”
Market watchers noted the pressure is concentrated at the long end of the curve. Chris Beauchamp, chief market analyst at IG, said: “Only when the 10-year yield shoots significantly higher should we really start to worry. For now, the government still has breathing space.”
Neil Wilson, strategist at Saxo Markets, said the shift was “more of a slow-motion train wreck than the flash-in-the-pan Truss episode,” adding: “Yields are rising across the world — US 30-year bonds have breached 5%, while French, German and Japanese yields are also climbing.”
For Reeves, the message from bond markets is clear: credibility will depend on a mix of tax and spending decisions that convince investors Britain can keep its debt burden under control.
With less than three months until budget day, gilt markets are sending Westminster an unmistakable signal — the room for manoeuvre is narrowing fast.
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UK long-term borrowing costs hit 27-year high as global bond markets wobble