UK bond yields hit highest level since 1998 as pension funds pull back on government bonds

UK bond yields have surged, reaching their highest levels since 1998, with 30-year government bonds at 5.4%. This increase is attributed to rising U.S. bond yields and concerns over UK borrowing and inflation, differing from the 2022 crisis caused by domestic policies. UK pension funds are less inclined to buy government bonds, purchasing only about 15% of the expected 300 billion pounds in gilt issuance this fiscal year. This situation may keep yields elevated as the government seeks buyers. The Bank of England faces pressure regarding its bond-selling program amid these rising yields. Adjustments to its quantitative tightening strategy may be necessary if market conditions worsen, particularly if distressed sellers emerge.