UK long-dated bonds are under considerable pressure, with 30-year gilt yields reaching 5.8% as of September 8, the highest level since 1998, as the country grapples with rising borrowing costs. This comes even as the Bank of England (BoE) is reportedly planning to cease its sales of 20- and 30-year gilts, a move that could potentially ease some of the supply pressure on the market. The BoE's monetary policy committee is expected to make an announcement this week regarding changes to its debt sales strategy, according to reports.
The central bank's consideration to halt long-dated bond sales is part of a broader overhaul of its debt management amid ongoing bond market turmoil. This decision is being made in consultation with the Treasury and the Debt Management Office (DMO). Economists have been urging the Chancellor, John Healey, to advocate for slowing or stopping the BoE's bond-selling program, arguing that the sales have contributed to higher borrowing costs and crystallized losses for the exchequer.
The current high borrowing costs are further exacerbating pressures on the UK's public finances. The UK recently sold £4.25 billion of 30-year bonds at the highest yield since 1998, highlighting the challenging environment for government borrowing. The ongoing quantitative tightening, where the BoE sells off bonds acquired during past quantitative easing programs, has been cited as a factor in increasing market supply and pushing up interest rates.
