British Bonds Surge Amidst Growing Global Tensions

British 30-year government bond yields rose to the highest levels since May 1998, reflecting increased U.S. Treasury yields and fiscal challenges. Analysts noted liquidity issues amid rising leverage. The Bank of England observed hedge fund borrowings spike significantly. Investors speculate on potential interest rate cuts by the BoE this year.

On Wednesday, British 30-year government bond yields soared to levels unseen since May 1998, climbing in tandem with U.S. Treasury yields driven by a series of heavy tariffs introduced by U.S. President Donald Trump against China. At its peak, the gilt yield hit 5.649% before stabilizing.

The sharp rise in bond yields underscores concerns about Britain's fiscal vulnerabilities, particularly as the Bank of England highlights the danger of leverage in an increasingly volatile market. With hedge funds ramping up gilt repo borrowing, liquidity risks loom large.

Investors are now betting on impending interest rate cuts by the Bank of England, anticipating adjustments that could occur as early as May. The market remains tense amid predictions of further economic pressures due to international policy decisions and domestic fiscal constraints.

(With inputs from agencies.)