UK gilt yields climb to 28-year peak as Budget looms

Government borrowing costs in the United Kingdom have climbed to a 28-year high, with the 30-year gilt yield reaching 5.89%, the strongest since 1998, and the 10-year gilt hitting its highest level since the 2008 financial crisis. The rise is attributed to inflation concerns stemming from the ongoing Iran war, competition from major technology companies for long-term financing, and worries over the size of state debt. Prime Minister Andy Burnham faces a tighter Budget window, as the higher yields reduce the leeway for Chancellor John Healey to fund consumer-friendly initiatives.

Downing Street reiterated that fiscal discipline underpins economic stability, while a spokesperson noted the government’s commitment to meeting fiscal rules and cutting the deficit faster than other G7 nations. Meanwhile, Chancellor Healey, speaking at a G20 finance meeting in the United States, highlighted the UK's rapid growth and productivity gains. Market analysts, including XTB research director Kathleen Brooks, warned that rising yields increase debt-service costs and signal uncomfortable conditions for the new administration.