Global bond sell-off piles new pressure on UK borrowing costs before budget

AI desk brief

A global bond sell-off is lifting UK borrowing costs, with 10-year gilt yields up to 5.38% and near last week’s 19-year high, while 30-year US Treasury yields jumped to 5.444%, the highest since 2004. For metals, the near-term implication is bearish: higher rates and firmer inflation expectations are pressuring real yields, which typically weighs on non-yielding assets like gold and silver.

The inflation/rates risk is being reinforced by energy. BoE chief economist Clare Lombardelli warned that if elevated oil prices persist, indirect effects could feed into inflation expectations, wage bargaining and price-setting, increasing the likelihood of further tightening even after the MPC held Bank Rate at 3.75% last week.