Gilts Highest This Century; Sterling at 5-Week Low Against Dollar
UK ten-year gilt yields rose 18 basis points to 5.18% on Friday, the highest since the 2008 financial crisis, and thirty-year yields rose 19 basis points to 5.85%, the highest this century, according to The Times. Sterling fell another 0.6% to $1.33, a five-week low, and is down almost 2% on the week against the dollar — its biggest weekly drop since November 2024. The FTSE 100 shed 1.7% and the FTSE 250 fell 1%.
Bonds across European markets sold off but gilts were the worst-performing major asset class. James Smith, an economist at ING, told The Times: “Investors are focused on the impact a leadership contest might have on Britain’s fiscal trajectory, gilt issuance over the next couple of years, and its interplay with inflation.” Jefferies economist Mohit Kumar said the base case is “a managed exit for Starmer and Burnham likely becoming the next PM”. RBC BlueBay CIO Mark Dowding said the fund had increased its bets against the pound. Burnham last year said governments should not be “in hock” to financial markets.