Global sovereign debt markets have had a rough week, with UK gilts and US treasuries both pushed to multi-year yield extremes as inflation fears, oil price spikes and fiscal anxiety feed off one another.
In the UK, the 10-year gilt yield hit 5.295% at 09:30 GMT, the highest since August 2007 and up two basis points on the day. This was a level not seen since the late 1990s. The move came ahead of Chancellor John Healey's pre-Budget speech, in which he pledged to maintain fiscal discipline.
Sterling assets are being repriced against a backdrop of Middle East-linked oil price rises and doubts over Prime Minister Andy Burnham's spending intentions, with Deutsche Bank warning that Healey's fiscal headroom could shrink from roughly £26 billion to around £13.8 billion ahead of the 28 October Budget.
British 10-year gilt yields touched their highest level in more than 19 years on Thursday as prices extended a sell-off that began on Wednesday, when oil prices rose above $100 a barrel for the first time in six weeks and pushed borrowing costs higher globally.
In the US, the 10-year Treasury yield touched 4.80% on Tuesday, its highest point in a year, after a stronger-than-expected August payrolls print reignited expectations of a Federal Reserve rate hike.
A strategist at Miller Tabak was quoted by CNBC as saying that 4.8% was a threshold above which sustained yields could create "meaningful problems" for other asset classes.
On Wednesday, US Treasury Secretary Scott Bessent's plan to cut borrowing costs was "swiftly rebuffed by the bond market", according to reports.
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