Yields on ten year gilts steady after surge past 4.2%

Four-fold rise during 2022

Jonathan Stapleton
clock • 2 min read
According to data from Refinitiv IFR Markets, yields on benchmark 10-year gilts rose from 0.974% at the beginning of this year to 2.803% at the end of August.
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According to data from Refinitiv IFR Markets, yields on benchmark 10-year gilts rose from 0.974% at the beginning of this year to 2.803% at the end of August.

Yields on benchmark 10 year government bonds have steadied slightly after surging by over 40 basis points to 4.282% yesterday.

At the start of trading today, yields dropped to 4.034%, before rising slightly to 4.102% by 10am.

According to data from Refinitiv IFR Markets, yields on benchmark 10-year gilts rose from 0.974% at the beginning of this year to 2.803% at the end of August. This month they had risen to 3.139% at the end of 16 September and 3.495 at the end of 22 September, the day before the chancellor's Mini Budget.

Yields on ten-year gilts surge to over 4%

By the close of last Friday, yields had spiked to 3.827 and yesterday rose significantly further to 4.282% by the end of the day.

Yields on long-dated gilts saw an even more substantial rise - with the yield on 25 year paper increasing from 3.841% at the end of last Thursday to 4.637% at the end of yesterday.

Commenting yesterday, XPS Pensions chief investment officer Simeon Willis said the "unprecedented" surge in gilt yields this morning on top of those seen on Friday would have improved UK pension scheme funding levels "by a greater quantum than a whole year's deficit removal contributions".

But he warned that liability-driven investment (LDI) managers were begining to flag new emergency collateral calls - a trend he said was likely to continue over the coming days.

M&G's Leaviss: 'Huge wave' of new issuance is set to weaken UK gilts further

Barnett Waddingham partner Ian Mills agreed - noting the gilt market had suffered an "allergic reaction" to the Mini Budget reflecting increasing expected future supply of gilts, combined with fears that the tax cuts will add further fuel to the inflationary fire.

Mills also thought the falls in liabilities could cause significant challenges, especially for schemes with LDI portfolios - urging schemes using LDI to "immediately review" whether their collateral buffers remain adequate, and consider taking remedial action if not.

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