UK 30-year gilt yield hits 18-year high amid Labour doubts

The yield on the UK 30-year gilt climbed to 5.807% on May 13, the highest level since 1998. Ten-year yields topped 5.11%, levels not seen since the 2008 financial crisis. Markets priced in higher long-term borrowing costs for the government as political uncertainty and rising energy prices influenced demand for gilts.

Speculation that poor local election results could lead to a leadership challenge for Prime Minister Keir Starmer has drawn attention to potential successors, including Andy Burnham and Angela Rayner. Those names are associated with policies seen as more fiscally liberal, and traders interpreted the possibility of a change at the top as increasing the chance of higher government borrowing.

At the same time, global natural gas prices have risen following the escalation of the Gulf conflict. The UK has been one of the more exposed G7 economies to energy-driven inflation because of its reliance on gas imports. Higher gas costs have kept inflation elevated and increased the likelihood that the Bank of England would raise its policy rate further, with market estimates pointing toward a potential peak near 5.25% if energy prices remain high.

UK borrowing costs have risen above those of other Group of Seven economies over roughly the past two months since the Gulf conflict intensified. Higher gilt yields increase the government’s funding costs and can raise borrowing costs for households and businesses through higher mortgage and corporate lending rates.

The current rise in yields has been compared with the gilt market turmoil of September 2022, when an unfunded fiscal plan triggered a sharp sell-off and forced the Bank of England to intervene with emergency bond purchases. The situation in May 2026 differs in that the Bank of England is already in a tightening cycle; buying large quantities of gilts while raising interest rates would create a direct policy conflict.

Cryptocurrency markets showed sensitivity to the gilt sell-off. Bitcoin rose about 5% to roughly $68,200 on May 13. Reported institutional holdings of Bitcoin through exchange-traded funds have exceeded $2 billion, and some investors increased accumulation during recent market stress.

Market participants and policymakers are focused on the Bank of England’s next policy decision and how long-term gilt yields respond. If the central bank raises its policy rate while long-term yields continue to climb, the gap between short-term policy rates and longer-term borrowing costs could widen, affecting mortgage borrowers and debt-dependent firms.