Global bond sell-off resumes as oil tops $107 a barrel and yields spike

Global government bond markets resumed a sell-off after oil jumped above $107 a barrel, rising about 6% on Thursday as concerns grew that Houthi advances along the Red Sea could disrupt Saudi crude exports.

The move pushed borrowing costs higher: 10‑year UK gilts topped 5.37%, the highest since 2007, while 10‑year US Treasuries reached 4.92%, the highest since 2023. Long‑term yields including 30‑year debt also hit highs not seen since 2007.

Higher oil prices are intensifying inflationary pressures and raising expectations that central banks will keep tightening. The European Central Bank raised its main rate to 2.5% on Thursday; President Christine Lagarde said inflation is likely to remain longer lasting than previously anticipated.

In the UK, higher debt servicing costs complicate Chancellor John Healey’s fiscal position ahead of his first budget on 28 October, reducing headroom for future investment. Healey has committed to controlling borrowing and lowering long‑term pressures on public finances while providing a “breathing space” for households.

In the US Treasury officials bought back $6bn of government debt in an attempt to lower yields, but the intervention did not halt the sell‑off. Market commentators say a sustained fall in long‑term yields would require either fiscal consolidation or significant shifts in monetary policy.

Federal Reserve policymakers, meeting next week under new chair Kevin Warsh, are widely expected to consider a rate increase. UK and EU data due in the coming days — on inflation, jobs and growth — are also set to influence monetary decisions and market moves.