Clients at a Wall Street bank have reportedly been unloading UK bonds at the fastest rate since the financial turmoil triggered by Liz Truss’s mini-budget.
Over the past week, bond yields have spiked following comments from the Bank of England Governor, who hinted that policymakers might take a “more aggressive” approach to interest rate cuts soon.
Yields on 10-year gilts climbed from 3.76% in mid-September to 4.23%, the highest since July, increasing the cost of government borrowing. The yield, an inverse measure of a bond’s price, represents the return the government agrees to pay its debt holders.
In 2022, bond yields surged dramatically after the market reacted negatively to Liz Truss’s unbacked tax reductions and spending increases announced during her mini-budget, contributing to her resignation as Prime Minister.
The Bank of New York Mellon Corporation (BNY) noted that customers are selling off gilts, or UK bonds, in anticipation of Rachel Reeves’ upcoming Budget this month.
Geoff Yu, BNY’s senior EMEA market strategist, spoke to Reuters, stating, “UK gilt markets have recently experienced the most intense selling by UK and international clients since the 2022 mini-budget.”
He reported that clients disposed of £3.04 billion worth of gilts last month.
