Truss's Gilt Yield Claim Sparks Debate Over Global Market Trends

Former British Prime Minister Liz Truss recently posted a chart that drew attention to the long-end gilts, circling around a key figure. She claimed that the Bank of England never managed to achieve a 6 percent gilt yield during her era, implying she was teaching current PM Andy Burnham a lesson about decline.

However, Truss's statement has been disputed by experts. The actual issue is not the Bank of England's achievement but rather the distinction between the institution and the market-determined price. The 30-year gilt yield has indeed risen to 5.95 percent, its highest level since 1998.

The current situation is different from Truss's era in 2022, when her government announced unfunded tax cuts that led to a sharp increase in the 30-year gilt yield. The market was priced for a later hike, not an immediate one this week.

The main driver of the rise in gilts is not domestic policy but rather global factors such as energy prices and inflation risk. The UK's gilt market is no exception to this trend, with yields rising alongside US Treasuries.