UK Gilts Back to 1998 Levels as US Data Puts the Market on the Hawk Patrol
Snapshot
Stoked by a splash of robust US numbers, 30‑year British gilts swelled to the highest yields since 1998—now cruising over 5.20%. That’s a clear sign investors are tightening their belts amid a fiscal wobble that feels more like a circus than a financial statement.
What’s Driving the Dread?
- Fiscal Red Zone: The October Budget left us with a meager £15.7 bn in the fiscal jacket. A single 1.3 pp lift in gilt yields could flip that slim margin into a black hole.
- March Money Crunch: The Treasury may fast‑track another tax hike or more borrowing—both might feel like a political sprint on a slippery slope.
- Retail Reality: The latest BRC data shows retail sales rising by a lazy 0.4 % YoY, with shops hinting at higher prices and layoffs to keep cost‑pockets tight.
- Stagflation Nudge: Inflation’s barreling forward. Headline rates hit 2.4 %, but the underlying core CPI sits flat at 2.7 %. The ECB’s got its eye on that blip, while the Fed’s still showing a hint of hawkish flair.
Cross‑Market Fallout
US economic chatter was buzzing louder than a squirrel on a caffeine binge: the ISM services index leapt to 54.1, the highest in a while, and the JOLTS job openings hit a six‑month peak.
The news sent stocks nosediving (S&P & Nasdaq slipped) and the dollar giving a satisfying little stretch of about 0.3%. This made the euro dip below 1.035, pulling greenback traders back onto their feet.
What’s On The Horizon?
- December FOMC Minutes: Eyes are peeled for any new policy hints—our central bank in the US seems to be twirling its dial, with a possible “skip” circle looming.
- ADP & Jobless Claims: The next week’s payroll news will wean us from the official payrolls and gives an extra nudge to the job market narrative.
- US Bond Dump: A big £22 bn of 30‑year bonds is slated for sale—likely to affect rates across the spectrum.
Because tomorrow’s markets will be quiet (a national moment of mourning for former President Carter), the day’s releases are the focus of our attention. Stay tuned—if you’re after real‑time updates on this buzzy financial drama, just hit the subscribe button.
