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The Kobeissi Letter@KobeissiLetter · Sep 15, 2026

The UK's bond market is collapsing. Today, the yield on a 30Y Bond in the UK hit 5.95%, its highest level since March…

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Summary

UK bond yields hit their highest level since 1998 as energy inflation resurges amid geopolitical tensions, fiscal deterioration pushes government spending to post-WWII highs, and the Bank of England faces a challenging policy balancing act between fighting inflation and avoiding corporate bankruptcies. Global bond yields are similarly surging, signaling a shift toward monetary tightening and sustained inflation concerns throughout the 2020s.

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  1. #1

    The UK's bond market is collapsing. Today, the yield on a 30Y Bond in the UK hit 5.95%, its highest level since March 1998. Yields in the UK are now 15 TIMES above 2020 levels, with the highest borrowing costs among G7 countries. What is happening? Let us explain. (a thread)

  2. #2

    First, energy inflation is out of control in both UK and broader Europe. Just as annual inflation was back down to the BoE's 2% target, inflation is back. It's set to rise above 3.0% and rate hikes are back on the table. 5+ years of compounding inflation continues.

  3. #3

    Amid the Iran War, energy inflation is skyrocketing. UK household energy bills are set to jump +25% in January due to rising oil prices. Natural gas prices in the UK are out of control, now up +165% this year, to their highest since 2022. UK energy inflation hit 9.8% in July.

  4. #4

    The fiscal picture for the UK is also deteriorating. Government spending hit 45% of GDP in 2025 and is set to rise above 55% by 2055. This will mark the highest percentage since 1945, the same year WW2 ended. All while revenue as a percentage of GDP is set to decline.

  5. #5

    As a result, the UK is facing a mountain of national debt. By 2073, the UK's debt is on course to hit 274% of GDP, implying a deficit running at a massive ~21% of GDP. Interest on this debt ALONE would be equal to ~13% of GDP. This is certainly not sustainable.

  6. #6

    Meanwhile, the Bank of England was cutting rates sharply heading into 2026. They believed that inflation was "transitory" and looked to stimulate the economy which had weakened substantially. Now, the BoE is behind the 8-ball as energy costs drive inflation sharply higher.

  7. #7

    The reality is that the UK is not alone in this crisis. In fact, global bond yields are surging amid deficit spending and inflation. Even yields in the US are now up to 2007 levels. In this market, we continue to believe the top priority is to position yourself accordingly.

  8. #8

    It's clear what's coming next. Monetary policy is shifting, rate hikes are returning, and the next battle against inflation has started. Just as we saw Treasury intervention in the US, the UK will likely soon intervene. Yields are simply unsustainable at current levels.

  9. #9

    This will be a delicate balancing act. Last year, corporate bankruptcies rose to their highest level since 2008. Rate cuts have begun to alleviate the pain. However, with tighter monetary policy back on the table, moving too far in the restrictive direction would be lethal.

  10. #10

    Inflation is the theme of the 2020s and bond yields are pricing-in more of it. Our research aims to anticipate swings in the market as macro conditions shift. Want to access our research? Subscribe at the link below to access our latest analysis: thekobeissiletter.com/subscribe

  11. #11

    Lastly, markets already know. It's no coincidence that stocks, gold, Bitcoin, and many hard assets are all rising together. The era of the asset owner continues and the fight against inflation nears year 6. Follow us @KobeissiLetter for real time analysis as this develops.