UK Pound Slides, 30-Year Gilt Yields Reach Highest Since 1998 Amid Fiscal Concerns

The British Pound has fallen sharply alongside a rise in gilt yields, signaling growing investor anxiety over the UK's fiscal outlook and government borrowing. The yield on the 30-year gilt reached levels not seen since 1998, reflecting concerns about the sustainability of the country's debt amid rising inflation and expectations of tax increases in the upcoming Autumn Budget. Prime Minister Keir Starmer's recent cabinet reshuffle, including the appointment of economic advisors, underscores efforts to strengthen fiscal management ahead of challenging economic conditions. Analysts note that the combination of rising borrowing costs, high inflation, and fiscal uncertainty is undermining confidence in UK assets and contributing to sterling's weakness, making it the poorest-performing G10 currency against the dollar recently. The situation highlights the delicate balance the Labour government faces between managing debt and supporting economic growth, with markets demanding a higher risk premium for holding UK debt and currency. Additionally, attention is on the Bank of England's monetary policy stance as investors seek guidance on interest rates and quantitative tightening in this uncertain environment.