Global bond rout deepens as oil prices jump; wheat prices highest since early 2023 – as it happened

Global bond markets extended their sell-off on Tuesday as rising oil prices and inflation concerns drove borrowing costs to multi-decade highs, while wheat prices climbed to their highest level since early 2023.

In the UK, long-term government borrowing costs surged to levels not seen since 1998, with 30-year gilt yields briefly reaching 5.89% before easing slightly to 5.85%. Ten-year gilt yields also climbed to 5.25%, marking their highest point since the 2008 financial crisis. The increases followed a sharp rise in oil prices, with Brent crude jumping over 2% to $92.42 a barrel, contributing to broader market volatility.

Across Europe, government bond yields also climbed, with Germany’s 10-year yield hitting a 15-year high of 3.34%. Japan’s 10-year benchmark bond yield reached 3% for the first time since 1996, while US Treasury yields rose to 4.78%, the highest since early 2025. Analysts cited concerns over persistent inflation risks and elevated government spending as key drivers of the sell-off.

Deutsche Bank’s chief UK economist, Sanjay Raja, warned that the higher yields could significantly reduce the government’s fiscal headroom ahead of the upcoming budget. Based on Tuesday’s yields, the headroom against current budget rules was projected to fall from £26 billion to £13.8 billion, with most of the deterioration attributed to increased debt servicing costs.

Elsewhere, gold prices declined 1.8% to $4,370 an ounce, while European and US stock markets also faced pressure, with the Nasdaq dropping 1.3% at the open. The broader market movements reflected growing investor unease over inflation and its potential impact on central bank policies.