As 2025 gets underway, the rise in gilt yields, with UK long-term borrowing costs hitting a 27-year high, is certainly raising a few eyebrows with Wealth managers and strategy makers alike. Richard Carter, head of fixed interest at Quilter Cheviot shares his thoughts with us on what’s behind these market moves as follows:
“Gilt yields have surged sharply in recent weeks, which is bad news for the government as it stokes fears about the state of public finances. This spike can be partly attributed to Donald Trump’s victory in the US presidential election, as his policies on tax and immigration are expected to drive inflation, leading to rising yields in the US and, consequently, in the UK as well.
“The Bank of England remains cautious about slashing interest rates too aggressively, and the tepid demand from investors at the latest gilt sale underscores the uncertainty in the market. The short-term outlook is particularly unpredictable as we approach Trump’s inauguration, adding to the volatility.
“Despite this turbulence, gilt yields still present an attractive opportunity for long-term investors. Currently, they are well above expected inflation levels, making them a viable option for those looking to secure returns in a sluggish economy that might prompt further rate cuts by the Bank of England.
“For investors with a lower risk appetite, short-dated gilts still offer a promising avenue and are less sensitive to market fluctuations.”
