UK Gilt Yields Reach Highest Since 1998 Amid Sterling Drop

Britain is experiencing significant fiscal challenges as borrowing costs surged to their highest level since 1998, causing the pound sterling to drop sharply by over 1.5%. This spike in government bond yields reflects growing investor anxiety about the UK's fiscal stability under Prime Minister Keir Starmer's Labour government. The rise in gilt yields is influenced by concerns over inflation expectations, prolonged higher interest rates, and broader global debt market pressures. In response, the government has restructured its economic advisory team, appointing Minouche Shafik as chief economic adviser to navigate the difficult fiscal landscape ahead. Analysts and industry experts are urging caution, with some suggesting a pause in the Bank of England's quantitative tightening to ease financial pressures. Overall, the UK's financial markets remain fragile amid uncertainty over fiscal policy, potential tax changes, and investor confidence.