Bailey Warns Defence Spending Uncertainty Fuels Bond Market Turmoil
Bank of England Governor Andrew Bailey warned on Friday that uncertainty over defence spending is contributing to turmoil in global bond markets. Speaking at the London School of Economics, Bailey identified military spending as a key factor behind the sharp rise in government borrowing costs.
The Governor described these challenges as very substantial structural issues, including supply shocks and deeper problems such as ageing populations and defence spending, which are putting pressure on bond markets.
Bailey also listed financing climate change as a significant pressure on public debt. Borrowing costs worldwide rose sharply at the start of the week, with Britain experiencing the largest increase in bond yields among G7 nations on Tuesday.
The yield on 10-year gilts reached 5.28% on Wednesday, their highest level since 2007, due to close ties between British and US debt markets.