As of Wednesday morning, the UK’s 30-year government bond yields had skyrocketed to 5.5% (the highest level since 1998), thwarting wider climbs in US sovereignty yields and sparking new concerns about financial market stability.
The surge in global bond yields puts significant downward pressure on risky assets. NASDAQ has fallen 10% since the US stock sales began last Thursday, while Bitcoin (BTC) has dropped 8% over the same period.
At the same time, the UK’s 30-year bond yields rose 8% in 30 years, while the US’s 30 years have increased 12%. Bytetree founder Charlie Morris believes investors will start seeking diversification into other assets, including Bitcoin.
“It appears that the UK has lived beyond that measure for too long. It hasn’t balanced the budget since 2001. The gold leaf market has been sufficient,” Morris said. “Investors who are looking to diversify from financial assets will buy not only gold but Bitcoin.”
The dramatic spikes in yields have revived the volatile memories of the UK’s 2022 pension crisis. At that time, a sudden surge in borrowing costs caused almost a collapse of the financial system, and ultimately, then Minister Liz, led her to work.
This latest bond market turmoil is driven by an escalation of uncertainty around global trade, caught up in a tariff plan proposed by President Donald Trump. These taxes can disrupt the global supply chain, increase costs and put pressure on an already volatile market.
“Unfortunately, in politics, you never get what you want by making citizen arguments from high principles,” former UK MP Steve Baker told Coindesk in an exclusive interview. “President Trump said he is using the Brute’s economic power, and he is. Now is the time to rediscover free trade at home and abroad before this chaos destroys our future.”
The recent surge in yields reiterates the events of 2022, when the surprising mini-budget announcement on September 23 caused a surge in gold leaf yields, crashing pounds, and exposing deep vulnerability to the UK pension system.
Many defined benefits pension plans adopted complex, responsible-driven investment (LDI) strategies, using leverage and derivatives tailored to long-term liabilities. However, as yields skyrocketed, these funds suffered from losses from large markets to markets, facing margin calls, pushing rapid gold leaf sales into thin markets, creating a volatile “fire sales” feedback loop.
At the time, the UK pension funds accounted for about 28% of the gold leaf market. The subsequent disruption that took place in the modest $1.5 trillion market was so serious that the Bank of England had to step in and stop the downward spiral in an emergency gold leaf purchase. a Chicago Fed Letter Analyzing the crisis, we subsequently identified excessive leverage, asset pooling, and limited depth of the gold leaf market as important structural weaknesses. This is in contrast to the much larger US financial market, especially the 9.9 trillion.
