UK Yields Reach Euro-Crisis Italian Levels

One of the many quaint moments on the British calendar arrives in late autumn when the Oxford University Press reveals its word of the year. Recent examples include “rage bait” and “brain rot,” both of which do a sadly accurate job of summarising our times (and yes, for any raging pedants among you: the OUP is allowed to pick a two-word phrase).

Back in 2012, the winner was a single word — eurogeddon — which pipped “omnishambles” to the post despite the efforts of then-chancellor George Osborne. Both words reflect the extent to which fiscal and political strife was high on the public consciousness; the aftershocks of the global financial crisis were still being felt, particularly in Europe’s single currency area, and fears were growing of a debt spiral moving beyond Greece to bigger economies, particularly Italy. “Contagion” was another near-ubiquitous word at the time.

Italy and Spain had the most expensive long-term debt of major European sovereigns, as you can see in the chart below. The UK, despite taking a massive thwack in 2008 due to the size of our financial sector, was faring relatively well — second in the class, closely behind Angela Merkel’s frugal Germany.

How things change. You will also notice, from the same chart, that the UK is now the class dunce. Indeed, early today it became the first Group-of-Seven country to pay over 6% for long-term debt since Italy back in 2012.

This is not a good record to hold. If you’re wondering why it’s happened and what it means, I can recommend three simple pieces of Bloomberg analysis. Firstly, we cannot ignore the fact that the world is gripped by a bond rout for which Britain carries very little if any blame. Our Markets team has broken out the underlying reasons in this handy 10-point list.

Still, that doesn’t explain why the UK keeps being hit worse than peer countries. An analysis by Bloomberg Economics earlier in the summer showed how this problem stems from the calamitous Truss-Kwarteng administration of 2022, but also how it’s crept back again under Labour.

Our economists Matt Bunny and Dan Hanson wrote back in July:

“The additional yield investors require to hold gilts – dubbed the ‘moron premium’ in the aftermath of former Prime Minister Liz Truss’s 2022 mini-budget – sits at around 30 basis points and is likely a reflection of past fiscal policy missteps and uncertainty about what comes next.”

Labour’s party conference this week did not really address that uncertainty. The tweak to the triple lock was nice enough, but minor compared with the costs of servicing Britain’s debt pile and delivering the national care service that Prime Minister Andy Burnham wants.

Our chief UK economics correspondent Phil Aldrick writes today of an £85 billion hole in the government’s long-term plans. To be clear, Burnham has not made the situation any worse since coming to power — but it does raise the prospect of more -geddons and -shambles in the years to come.

Want this in your inbox each weekday? You can sign up here.

Stories you need to know

FlyDubai Pilot Who Tried to Crash Plane Identified as OmaniBank of England Governor Bailey Warns AI Boom Could Trigger Market ShocksHealey’s £4 Billion Fuel Tax Windfall Risks Growing Driver BacklashHSBC’s New Trading Floor Has Far Less Headroom Than Its Rivals

Markets Today: Wild Bonds

Hi, I’m Sam from the MT blog and, honestly, it has become very difficult to extrapolate market moves beyond a couple of hours these days, typified in today’s session by bonds.

There was a selloff in the morning, causing the milestone that Julian described above. It’s the kind of round, psychologically important number that snaps up trader attention. Within a few hours, however, that selloff had reversed. And then, it reversed again, and honestly my bond screen looks very messy. (If you’re struggling with the volatility, the new episode of the Odd Lots podcast has your back.)

The point is that narratives can change very quickly in modern markets, where a myriad of pressures on bond markets are creating a fraught backdrop. But if you zoom out, the picture is the same for the UK and everywhere else. Every time there’s an excuse for a bond selloff these days, investors seem to take it.

Read the Markets Today live blog for rolling news and up-to-the-minute analysis during UK market hours.

The big number

227,665The growth in the UK population in the year to mid-2025 — the slowest rate of increase since 1998, due to much lower immigration.

One Big Story

Elite Sheepdogs Turn Yorkshire Town Into a Global HubBritain’s well-bred border collies are attracting international buyers who see them as indispensable workers, not pampered pets.

More from Bloomberg

Enjoying The Readout? Check out these newsletters:

Markets Daily for what’s moving in stocks, bonds, FX and commoditiesOdd Lots for exploring the most interesting topics in finance, markets and economicsMoney Distilled for John Stepek’s daily newsletter on what market moves mean for your moneyThe London Rush for getting briefed ahead of your morning callsMerryn Talks Money for micro to macro thoughts on your money and investments

You have exclusive access to other subscriber-only newsletters. Explore all newsletters here to get most out of your Bloomberg subscription.

Please send thoughts, tips and feedback to readout@bloomberg.net. You can follow Bloomberg UK on X.