Governments typically borrow to cover expenditure gaps, issuing bonds which provide investors a stream of interest payments, thus enabling financial stability despite deficits.
UK gilts are traditionally regarded as safe investments, leading to their attractiveness to pension funds. However, rising yields now signal increased borrowing costs for the government.
Current economic concerns include inflation reaching 2.6%, exceeding the Bank of England's target, alongside two consecutive months of economic contraction, affecting investor confidence.
The rising yields on government bonds across the globe further indicate unease among investors about future inflation and economic stability, prompting shifts in currency values.
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