UK Gilts – 13th January 2025 

Gilts are bonds issued by the UK government and generally considered a low risk investment with fixed interest payments. Recently the UK gilt market has recently experienced significant volatility, with yields reaching levels not seen since the late 1990s and the 2008 financial crisis. As of 10th January 2025 the 10-year gilt yield was 4.82%, indicating a substantial rise over the past year. This poses significant challenges for policymakers who will need to carefully manage these dynamics to balance inflation control, economic growth and fiscal sustainability.

This surge in yields has been influenced by several factors: 

Global Economic Indicators: Robust economic data from the United States, particularly strong job reports, have led to increased U.S. Treasury yields. Given the interconnectedness of global financial markets, this has exerted upward pressure on UK gilt yields.  

Domestic Economic Concerns: The UK's economic outlook, characterized by persistent inflation and sluggish growth, has raised investor apprehensions. These concerns have contributed to the sell-off in gilts, driving yields higher.  

Currency Fluctuations: The British pound has experienced volatility, recently declining to a 14-month low against the U.S. dollar. Such currency movements can impact investor sentiment and influence gilt market dynamics.  

Where gilts go next will depend on various factors including global economic conditions, domestic fiscal policies and inflation trends. Analysts suggest that if inflation continues to decline and the Bank of England begins to cut rates then the investment landscape for UK gilts could improve.