Lale Akoner, global market analyst at eToro, says gilt yields are rising because markets are starting to price in a more fragile UK outlook than headline data suggests.
In a note, she points to a combination of political uncertainty, energy sensitivity and fiscal pressure that is forcing investors to reassess how much risk they are willing to carry and says that adjustment is happening quickly ahead of local elections.
Investors are responding by demanding a higher premium to hold UK debt, particularly at the long end, where sensitivity to political and economic risks is greatest, and less stable demand dynamics are amplifying moves in yields.
If uncertainty persists, upward pressure on yields is likely to remain with broader implications for borrowing costs and financial conditions, and the upcoming local elections will be the near-term test, the analyst noted.
