Why Rising Gilt Yields Matter – with Cherry Reynard
5/20/202620 min
UK government borrowing costs have climbed to their highest levels in decades – and suddenly the bond market is back in focus.
In this episode of Investing Unlocked Extra, Georgie Frost is joined by author and award-winning investment journalist Cherry Reynard to unpack what’s happening in the gilt market, why investors are getting nervous about Britain’s finances and what it could mean for mortgages, pensions and the wider economy.
They discuss:
- What gilts actually are – and why they matter
- Why rising yields affect mortgage rates and borrowing costs
- Whether this is another “Liz Truss moment”
- The role of inflation, energy prices and political instability
- Why bond markets care so much about fiscal credibility
- Whether UK government debt is becoming a problem
- How gilts show up in pensions and investments
- Whether bonds are actually attractive again for investors
Cherry also explains the famous “bond vigilantes” idea, why markets can intimidate governments, and whether Britain’s finances are more fragile than many people realise.
If you’ve heard people talking about gilt yields and wondered why it matters to your own money, this episode breaks it down clearly, calmly and without jargon.
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Clips
Transcript preview
First 90 secondsCherry Reynard· Guest0:00
One pound in every 10 raised in taxes goes on debt interest. It's like one and a half times the annual school budget. It's enormous. So we are very vulnerable to changes in the cost of borrowing. If you irritate the bond market, the cost of borrowing goes up. You've already got a deficit, but suddenly it just balloons. I mean, you have a full-blown financial crisis, and it's a very quick transmission mechanism to the economy, to real people and their lives.
Georgie Frost· Host0:34
This is Investing Unlocked Extra, sponsored by PensionBee, and I'm Georgie Frost. UK government borrowing costs have climbed to their highest levels in decades. Today we're talking about gilts, UK government bonds, and why they matter far beyond the city. Joining me to break it all down is author and award-winning investment journalist Cherry Maynard. Cherry, welcome. Thank you so much for joining us. Firstly, Cherry, if you wouldn't mind, a 101. Exactly what are gilts? Why are they back in the headlines? Why are they so important?
Cherry Reynard· Guest1:02
Well, governments need money to pay for the NHS, to pay for pensions. Some of that money it raises in taxes, some of it it borrows because it doesn't raise quite enough in taxes. Now, to borrow that money, the mechanism by which it borrows that money is it issues bonds. The idea with the bond is that people lend money to the UK government, they get an interest rate on that money for a certain period of time, then they