The British government is set to announce its budget amid some concerning news: the cost of borrowing for the government is significantly increasing. According to Bloomberg, on September 1st, the yield on the UK’s 30-year government bonds rose to 5.89%, reaching its highest level since 1998; the 10-year government bond yield also rose to 5.223%, the highest since 2008.
At the same time, global bond markets are under pressure. On Tuesday, Japan’s 10-year government bond yield also rose to its highest level since 1996.
The UK government’s Autumn Budget is scheduled to be released on October 28, 2026. This will be the first budget under the new Chancellor of the Exchequer, John Healey.
There is a general market concern that rising oil prices and tensions in the Middle East could once again push up inflation. If inflationary pressures persist, countries may need to maintain high interest rates for a longer period, and there is even the possibility of raising rates again, further increasing the borrowing costs for governments worldwide.
Oliver Faizallah, Director of Fixed Income Research at Raymond James Financial, stated that current bond yields already reflect market concerns about continued inflation, central banks raising interest rates, and governments increasing debt issuance.
However, Faizallah believes that the recent sell-off in bond markets has largely absorbed these risks, so the potential for a significant further increase in yields may be limited.