Does no one care about Britain's soaring gilts?
On the bond markets, the yield on the UK's 30-year gilt rose yesterday to 5.6 per cent, overtaking the equivalent US yield for the first time in a generation, and approaching its highest level since 1998. The 30-year yield is significant, because it represents investors' views of the long-term solvency of the British state. It is a judgement on whether the money you lend to the government now will be returned in 2055 and whether the interest will be paid in the meantime. And while the answer to that is still 'yes', it is a far less definite 'yes' than it has been at any time over the course of this century. It is fast getting close to the level where it is more like a 'well, maybe'. It is not just 30-year debt. The yield on benchmark 10-year gilts has been soaring as well, rising to 4.7 per cent. It is above the level that provoked the meltdown in the wake of Liz Truss's mini-budget back in 2023, when it spiked up to 4.3 per cent, a level that, at least according to every Labour front-bencher, 'crashed the economy'.
That matters, for two reasons. First, we are already spending vast amounts of money servicing our debt. According to the Office for Budget Responsibility, over the course of this financial year, the UK will spend £111 billion on debt servicing alone, or 8.3 per cent of total public spending. As the debt becomes more expensive, and as it has to be refinanced, that figure will only grow and grow. Very soon the Chancellor will be raising our taxes not to pay for more hospitals, or better schools, but simply to pay the interest on our outstanding debt. The rising yield also reflects a consensus view that the British government has lost control of its finances, and once the markets have formed that opinion it will be very hard to get investors to change their minds.
The harsh reality is this. If the 30-year yield goes above 6 per cent, Britain is almost certainly broke. We have not quite got there yet, but we are getting dangerously close. When it happens, no one can say they weren't warned.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Daily Mirror
a minute ago
- Daily Mirror
Kneecap's Mo Chara court LIVE: Musician appears in court over terror offence
Kneecap member Liam Óg Ó hAnnaidh, known as Mo Chara, is appearing at Westminster Magistrates Court today. The Kneecap star, 27, is facing an investigation after allegedly supporting a proscribed terror organisation. In November last year, at a gig in London, he was accused of displaying a flag in support of the terror group Hezbollah. The group have continuously denied the allegations that Óg Ó hAnnaidh is facing. Demonstrations to support the musician have been arranged outside of Westminster Magistrates, as well as in Dublin, Ireland. London's Metropolitan Police have since imposed conditions, limiting where demonstrations can take place outside of the court, stating that they need to "prevent serious disruption." The rap trio have branded the move "a calculated political decision designed to try and portray support for Kneecap as somehow troublesome." They added: "There is no basis for this, our last hearing was entirely peaceful and a loving show of solidarity with the most disruptive attendees the right wing media." They said in a statement: "We know all of our supporters will be, but please go out of your way to be compliant with all instructions issued, irrespective of how pitiful." It was previously heard that Óg Ó hAnnaidh is "well within his rights" to voice his opinions on the Israel-Palestine conflict, but the alleged incident at the O2 Forum in Kentish Town, north London, was described as a "wholly different thing". Óg Ó hAnnaidh is yet to enter a plea to the charge. We will be bringing you live updates throughout the case. 08:51Daniel Bird Metropolitan Police statement The Met have confirmed that there is a Public Order Act in place today. In a statement shared on X, formerly Twitter, the force said: "We've imposed Public Order Act conditions to prevent serious disruption being caused by a protest outside Westminster Magistrates' Court tomorrow. "Protest in support of Liam Óg Ó hAnnaidh and aligned causes must remain in the red area. Any stage must be erected in the green area." 08:33Daniel Bird Supporters arrive at London court Fans of the band have already started arriving at Westminster Magistrates' Court to show their support, with placards and some waving Palestinian flags. One sign said: "Kneecap rap for what is right." While another read: "Hands off Mo Chara." 08:30Daniel Bird Demonstrations to take place Kneecap fans have been asked to support Óg Ó hAnnaidh outside of Westminster Magistrates Court, as well as outside Connolly Books in Temple Bar, Dublin. 08:29Daniel Bird Kneecap's statement ahead of Óg Ó hAnnaidh's appearance in court Taking to Instagram on Tuesday following a statement from the Met, who have imposed a Public Order Act, the band said: "We massively appreciate the support of what we know are the majority of the public, who can see this farce for what it is. It is distraction from war crimes that the British state support. "In our view this police action is designed to try and portray support for kneecap as somehow troublesome. It is a calculated political decision the night before Mo Chara's court appearance. "There is no basis for this, our last hearing was entirely peaceful and a loving show of solidarity with the most disruptive attendees the right wing media. We know all of our supporters will be, but please go out of your way to be compliant with all instructions issued, irrespective of how pitiful. "Free Palestine."
Telegraph
3 minutes ago
- Telegraph
Reeves's fiscal recklessness is causing even more pain than we feared
The government's spin doctors could always try blaming Oasis, although given the robust, four-lettered response it is likely to provoke from the Gallagher brothers it may not be the wisest course of action. It is just possible that the sky high costs of tickets and hotel rooms for their reunion tour may have nudged up the index a fraction. And yet, it is already clear that today's terrible inflation data, with prices rising by far more than the City expected, is entirely the fault of the government. In reality, the Chancellor Rachel Reeves has plunged Britain into an inflationary doom loop – and she has no way out of it. The 3.8 per cent inflation rate reported today by the Office for National Statistics was far worse than expected. The rate at which prices are rising has now almost doubled since Labour won the general election. Sure, we can pin some of the blame for that on the Bank of England. It is hard to know what the Bank thought it was doing when it cut interest rates to 4 per cent last week. In effect, we now have a 'real' interest rate of just 0.2 per cent, far too low to control inflation. The catastrophic decision to push up employer's National Insurance has fed directly into prices in the shops, just as the economic textbooks said that it would. Driving up the living wage to one of the highest levels in the world, and putting up business rates, has meant those costs and lavish public sector pay awards have pushed up wages for private businesses, and those have been passed on in higher prices as well. Inflation is fairly subdued across most of the developed world, with the rate running at just 2 per cent in the euro-zone. It is just in Britain that it is soaring again, and it is driven entirely by the government's recklessness. The trouble is, higher inflation is going to make the fiscal mess Reeves faces far, far worse. Gilt yields will go higher, and the £111 billion, or 8.3 per cent of total public spending, we were already forecast by the Office for Budget Responsibility to spend on debt interest this year may go to £120 billion or even £130 billion. The triple lock will mean pensions have to go up more than forecast, and so will many welfare payments, while the public sector unions will demand higher wages to compensate for higher prices. Reeves will have to raise taxes by a punishing amount in the autumn Budget, but those will have to be passed on to consumers as well, sparking yet more price rises, higher inflation, and then even higher taxes. In reality, the Chancellor has plunged the UK into an inflationary doom loop. The only way to bring rising prices back under control is this. The Bank needs to push up interest rates to 6 per cent or more, while the government needs to make deep cuts in public spending, starting with welfare, and public sector salaries. There is almost no chance of this government admitting that, or making the tough decisions that are now needed to get the nation's finances back in shape. Instead, it will try to muddle through until a crisis in the bond markets forces the UK to change direction – and that day of reckoning may be a lot closer than anyone inside the complacent Westminster bubble realises right now.
The Independent
33 minutes ago
- The Independent
Inflation hits highest level since January 2024
UK Consumer Prices Index (CPI) inflation rose to 3.8% in July, up from 3.6% in June, surpassing most economists' forecasts of 3.7%. Transport was the main contributor to the inflation increase, primarily driven by a 30.2% surge in air fares between June and July, the largest monthly rise since 2001. Petrol and diesel prices also increased in July, contrasting with a decline during the same period last year. Food and drink inflation continued its upward trend for the fourth consecutive month, reaching 4.9% in July from 4.5% in June. Chancellor Rachel Reeves acknowledged that further measures are required to alleviate the cost of living pressures on households.
