Well, they’re not wrong I suppose but there are domestic factors that have driven the rise in UK bond yields as well. The latest budget being of course one that market players are much alluding to. The high for 10-year gilt yields this week was 4.92% but even now at 4.83%, it is still at its highest since 2008.
UK 10-year bond yields (%) monthly chart
PIMCO is still retaining a positive outlook for UK gilts despite this latest round of selloff. Adding that chances of fiscal contraction in the UK are growing.
“If the current trends of rising yields and slowing growth persist, the chances of spending cuts or tax increases will increase for the government to adhere to its new fiscal rules.”
It has been a bit of a jolt for many bond players, who coming into the turn of the year have anticipated for gilts to rally on the narrative that the BOE will cut rates amid a slowing economy. But now we’re seeing that stagflation worries should not be underestimated surely.