Is the UK the Harbinger of Things to Come

The UK is leading the global trend of 'bad' yield increases driven by negative supply shocks and political instability, offering little near-term hope for growth-led recovery. While political risks are elevated, the trauma of the 2022 'mini-budget' likely prevents a repeat of unfunded fiscal expansions.

Key Takeaways

• 1.The UK is currently the primary example of the 'bad' rise in yields, driven by negative supply shocks and political volatility rather than productivity.
• 2.The memory of the 2022 Liz Truss 'moron premium' fiscal shock serves as an inoculation against unfunded stimulus plans from current or future UK leadership.
• 3.Current political uncertainty involving Prime Minister Starmer and the rise of the Reform party is being priced into the Gilt market as a risk premium.

Table of Contents

• Is the UK the harbinger of things to come for global yields?
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