The yield on UK government bonds – sometimes referred to as gilts – has jumped to the highest level since 1998.
A higher yield means the government has to pay more money to investors.
Government bonds have been under pressure globally, with yields rising across the United States and Europe.
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There are also specific circumstances that some experts say are leading to yields rising in the UK.
“It largely reflects global factors, plus a bit of worry about sticky UK inflation, ongoing UK fiscal deficits, and long-term political risk caused by rise of Reform,” he said.
The Government has a set of self-imposed rules that govern its tax and spending decisions.
“Gilt yields in the UK rose after the Prime Minister reshuffled the deck, seemingly sidelining his iron Chancellor Reeves by poaching her deputy. If the Treasury won’t break the rules, then perhaps Number 10 can?” said Wilson.
What does the rise in gilt yields mean for taxes?
Most economists already accept that taxes will have to rise in the autumn, with experts split on how much they will have to go up by.
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She said: “We now think she will have to raise £18bn to £28bn in the Autumn Budget, mostly via higher taxes.”
He had previously forecast that the Government would need to raise taxes by about £20bn. He added: “We’re probably now in the £20bn to £25bn region.”
Often at the Budget, the Chancellor will offset bad news – like tax rises – with a so-called ‘rabbit out of the hat’. This is usually a surprise positive measure, like a tax cut or a spending increase, that they expect to be popular with the public.
Gold reaches record high as investors seek safety
In times of global economic turbulence, investors often look to put their money in a safe haven with gold often seen as one of the safest assets.
Kathleen Brooks, research director at XTB, said: “A selloff in the bond market and a rush to the dollar and gold are signs that investors are rushing into safe havens and liquid assets as we move through the week.
Gold has seen many hikes to prices this year, especially following Donald Trump’s controversial introduction of retaliatory tariffs on countries around the world.
Others factors influencing today’s surge include a weakening US dollar and the prospect of more interest rate cuts by the Federal Reserve.
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