Key points
- Bank of England policy and UK public finances drive yields.
- A gilt sell-off in 2022 triggered a crisis in pension funds' liability-driven investment (LDI) strategies.
- One of the main government bond markets alongside US Treasuries, Bunds and JGBs.
Example
Gilt yields reflect expected Bank Rate over the life of the bond plus a premium for risk, which includes how confident investors are in UK fiscal policy.
In history
After the September 2022 mini-budget, 30-year gilt yields rose more than 1.5 percentage points in a few days, forcing pension funds using LDI to sell gilts. The Bank of England stepped in with temporary bond purchases.
Related terms