UK long-term borrowing costs ease after midweek bond sell-off

UK long-term borrowing costs eased on Thursday after government bond yields hit their highest levels in decades earlier in the week, as a calming in global markets and a fall in US borrowing costs helped to steady gilts.

The yield on 30-year UK government bonds, a widely watched gauge of long-term borrowing costs, slipped to about 5.57% from a midweek peak of 5.75% on Wednesday, a level that was the highest since 1998. Analysts said the retreat in US yields had a knock-on effect on the UK market, helping push longer-dated gilt yields lower.

Markets had been on edge after a period of rising yields across developed economies. Earlier in the week, 30-year bond yields in Germany, France and the Netherlands climbed to their highest levels since 2011. In the United States, the 30-year Treasury yield rose to its highest in more than a month before easing, adding to global upward pressure on borrowing costs.

The increases in yields in recent weeks have been driven by a mix of factors, market participants said, including geopolitical tensions, shifts in US trade policy under President Donald Trump and high levels of government borrowing in several countries. In the UK, those moves were compounded by investor concerns about public finances.

Bank of England Governor Andrew Bailey told the Treasury Committee on Wednesday that it was "important not to focus too much" on longer-term bond yields, noting that interest rates had been rising "across the developed world." He cautioned against reading too much into short-term moves in the long end of the curve while policymakers and markets continued to digest global economic and political developments.

The recent volatility in bond markets has implications for governments and borrowers because higher yields translate into higher costs for financing long-term debt. For the UK government, sustained increases in gilt yields would raise the cost of issuing new debt and refinancing existing obligations.

Traders and analysts said the temporary easing of gilt yields reflected a combination of technical factors after the midweek sell-off and the influence of moves in US Treasuries. Market participants will be watching incoming data on inflation, growth and fiscal policy statements for signals that could determine whether yields resume their earlier climb or stabilise at current levels.

For now, the fall in long-term borrowing costs offers some relief to the government and investors, but analysts cautioned that yields remain elevated by recent historical standards and vulnerable to renewed global shocks or shifts in domestic fiscal outlooks.