The mood in Britain’s bond market is bordering on hysteria. Thirty-year gilt yields have surged to levels not seen since 1998, stoking fears of another sovereign wobble. But the panic may be misplaced. Strip away the noise, and the selloff looks more like part of a global repricing than a uniquely British drama — and it could even be setting up a rare buying opportunity.
The numbers are eye-catching. Long-dated UK yields have jumped more than 50 basis points since late July, briefly topping 5.7% before easing back to just under 5.5%. The culprit is stubborn inflation: retail price growth has ticked back up to 4.8%, confounding expectations of a slowdown. That’s despite sterling’s 8% rally this year to around US$1.35, a move that ought to have imported some disinflation. Add to that a Labour government under political pressure and fiscal room that’s vanishing fast, and investors have been quick to hit the sell button.
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Yet Britain is hardly alone. In Japan, 30-year yields have soared by a full percentage point this year as the Bank of Japan edges away from decades of ultra-loose policy. Germany and France have seen comparable moves, with their long bonds up 80 and 76 basis points, respectively. In Paris, domestic politics have compounded the shift, while Berlin’s move looks like good old-fashioned mean reversion after years of negative yields.
The UK, in other words, is being swept up in a broader reset. Investors are finally adjusting to the idea that global yields are normalising. That doesn’t mean Britain is in the clear — far from it — but it does suggest that reading the gilt market as a uniquely British crisis is overblown.
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