# Investors flee UK bonds, pushing gilts to huge monthly loss Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-08-31 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Investors Dump UK Government Bonds Amid Economic Crisis Meta Description: Investors are selling UK government bonds as economic crisis looms, with gilts on track for sharpest monthly loss on record. Political uncertainty adds to URL: https://financedigest.com/investors-flee-uk-bonds-pushing-gilts-to-huge-monthly-losshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-08-31t093441z1lynxmpei7u0crrtroptp4britain-sterling-pix-1736815322142-compressed.jpg) LONDON (Reuters) -Investors alarmed at Britain’s bleak economic outlook and political uncertainty dumped government bonds on Wednesday, extending a recent selloff and putting some gilt maturities on track for their sharpest monthly loss since records began. Some gilts saw far heavier selling than U.S. or German bonds as a decline in the value of sterling and doubts over the ability of Britain’s next prime minister to handle the growing [economic crisis added to strains](https://www.financedigest.com/uae-plans-long-term-economic-ties-with-israel-despite-political-strains.html "UAE plans long-term economic ties with Israel despite political strains") on investor confidence. I’ve not seen anything like this since ’94,” said veteran economist and market strategist Marc Ostwald from brokerage ADM Investor Services, referring to the international [bond market collapse that year triggered by rising interest](https://www.financedigest.com/delivery-hero-ramps-up-interest-payments-to-raise-1-billion-euro-convertible-bond.html "Delivery Hero ramps up interest payments to raise 1 billion euro convertible bond") rates. “This is one of those ultimate meltdowns.” The Conservative Party [leadership race – a choice between front-runner Foreign Secretary Liz Truss and former finance minister](https://www.financedigest.com/scottish-finance-minister-kate-forbes-to-run-for-countrys-leadership.html "Scottish finance minister Kate Forbes to run for country’s leadership") Rishi Sunak – concludes on Monday. Sunak himself [raised concerns about investor](https://www.financedigest.com/boe-raises-rates-again-as-investors-look-towards-end-of-hikes.html "BoE raises rates again as investors look towards end of hikes") confidence in Britain under a Truss government in a Financial Times interview published this week. The nature of fiscal support that [Truss might be planning as prime minister](https://www.financedigest.com/liz-truss-resigns-after-six-weeks-as-uk-prime-minister.html "Liz Truss resigns after six weeks as UK prime minister") was a concern for investors, Philip Shaw, chief economist at Investec, said. Truss has recently hinted at [providing direct support](https://www.financedigest.com/keysource-to-provide-critical-facilitiesmanagement-support-for-leeds-city-council.html "KEYSOURCE TO PROVIDE CRITICAL FACILITIESMANAGEMENT SUPPORT FOR LEEDS CITY COUNCIL") for households as well as tax cuts, something which would add to Britain’s still huge borrowing levels after the coronavirus pandemic. “This reminds me of March 2020 when the UK was not locking down for COVID. The pound plumetted then and only [bounced back](https://www.financedigest.com/biotech-stocks-pin-bounce-back-hopes-on-ma-boost.html "Biotech stocks pin bounce back hopes on M&A boost") when Boris Johnson reversed course,” Shaw said. Markets want to hear about more help for households but they are far from convinced about the need for [tax cuts.”](https://www.financedigest.com/instant-view-british-pound-up-as-govt-makes-u-turn-on-tax-cut-plan.html "Instant View: British pound up as govt makes U-turn on tax cut plan") Long-dated gilts saw the heaviest selling on Wednesday, with the 20-year yield up by 13 points on the day, rising above 3.2% for the first [time since](https://www.financedigest.com/soccer-arsenal-reach-womens-champions-league-semis-for-first-time-since-2013.html "Soccer-Arsenal reach Women’s Champions League semis for first time since 2013") 2014. Similar U.S. and German [bonds on Wednesday saw yields rise](https://www.financedigest.com/global-equities-gain-as-rising-bond-yields-pressure-gold.html "Global equities gain, as rising bond yields pressure gold") by around 2 or 3 basis points. That left the 20-year gilt on track to [end August some 81 basis points higher](https://www.financedigest.com/oil-set-to-end-turbulent-2022-modestly-higher.html "Oil set to end turbulent 2022 modestly higher") than its July closing level, which would be the largest monthly increase since Refinitiv records began in the mid-1980s. Longer-running [Bank of England](https://www.financedigest.com/bank-of-england-consults-on-remaining-basel-bank-capital-rules.html) records suggest it would be the largest monthly increase since 1978. It was a similar story for the 5-year gilt , which struck a peak yield of 2.828%, its [highest since](https://www.financedigest.com/russian-inflation-accelerates-to-7-61-m-m-in-march-highest-since-1999.html "Russian inflation accelerates to 7.61% m/m in March, highest since 1999") April 2010. It was last up around 10 basis points on the [day and on track to end](https://www.financedigest.com/amazon-to-lay-off-staff-in-u-s-canada-and-costa-rica-by-end-of-day.html "Amazon to lay off staff in U.S., Canada and Costa Rica by end of day") the month 117 basis points higher – another record. The BoE’s plans to begin selling its stock of gilts from next [month represents an additional source of uncertainty for investors](https://www.financedigest.com/6-months-to-go-until-brexit-and-investor-sentiment-remains-bold.html "6 months to go until Brexit and investor sentiment remains bold"). The central bank has said it wants to [sell gilts even through difficult economic times](https://www.financedigest.com/best-selling-books-of-all-time.html "Best selling books of all time"), although it has pointed to the March 2020 meltdown as an example of what might force it to change tack. The [really ugly part](https://www.financedigest.com/what-hyper-converged-infrastructure-really-means-for-your-financial-institution-part-2.html "What hyper converged infrastructure really means for your financial institution (Part 2)") of it is it’s relentless,” Ostwald said of the sell-off in gilts. “There’s no one stepping in to catch the falling knife.” (Reporting by Andy Bruce; editing by David Milliken, Alexandra Hudson) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---