Gilts Extend Selloff, 10-Year Yield Approaches 3%The yield on Britain’s 10-year Gilt surged to approach the 3% mark in early September, tracking the downturn in the sterling to levels not seen since the start of 2014 as concerns of balance of payments instability and expectations of continued interest rate hikes by major central banks pressured British debt. The confirmation that Liz Truss is set to lead the UK’s conservative party increased selling activity for Gilts, driven by worries of unfunded fiscal expansion as the newly elected PM pledged large tax cuts and proposed measures to stimulate the economy with added fiscal spending. In the meantime, BoE Mann said that interest rates should be raised in a more aggressive pace as the central bank’s gradualist approach has failed to curb the rise in borrowing costs so far, risking elevated inflation for a prolonged time in the UK’s economy. The central bank sees inflation peaking at 13.3% in October and projects the country to enter a recession in Q4 and lasting for five quarters.
