Image Credit: Shutterstock
Key Takeaways
- Liz Truss warns that debt-driven bond yield spikes could force the U.K. into emergency spending cuts.
- U.K. 10-year gilt yields have climbed above 5.2%, part of a broader global rise also hitting the U.S., Japan, France and Germany.
- Gold and Bitcoin have pulled back from recent highs but remain elevated, reflecting a partly unwound debasement trade.
Former U.K. Prime Minister Liz Truss said surging global bond yields reflect mounting government debt and currency debasement, calling Britain one of the worst examples among major economies. Truss warned the situation may have already gone far enough to force the government into emergency spending cuts.
Truss Points to Currency Debasement as the Root Cause
Truss said in an interview that global bond yields are climbing because of high debt levels across major economies, with the U.K. among the most exposed. She said the Bank of England s monetary policy has weakened the currency’s value over time. Truss said:
“Global bond yields are spiking due to mountains of debt and the U.K. is one of the worst examples. The Bank of England has printed money and debased the currency.”
Truss briefly served as U.K. prime minister in 2022 before resigning after a government spending and tax package she introduced triggered a sharp selloff in U.K. government bonds. She said the current pressure on the country’s finances may leave officials with limited options. According to Truss:
“The only way out whilst maintaining public support is to grow the economy faster through supply-side measures whilst holding down spending. I fear, though, the situation has gone too far, and we may end up with imposed emergency spending cuts.”
UK Borrowing Costs Have Risen Sharply Since Truss Left Office
The U.K.’s 10-year gilt yield has climbed above 5.2%, and the 30-year yield is approaching 6%, up from 5.12% during Truss’s time in office in 2022. Bond yields and prices move in opposite directions, meaning the rise reflects investors demanding higher returns to hold U.K. government debt.
The U.K. has recorded one of the sharpest increases in borrowing costs among major developed economies in recent weeks, a pattern that has drawn comparisons to the market conditions that pressured the country’s finances during Truss’s brief tenure.
The Yield Selloff Is a Global Phenomenon, Not Just Britain’s
The bond market pressure is not confined to the U.K. Yields have also accelerated across the United States, Japan, France, and Germany. This points to a broader global dynamic tied to rising government debt, inflation concerns, and questions about long-term fiscal sustainability rather than a problem specific to any single country.
The benchmark U.S. 10-year Treasury yield has climbed back above 4.8%, erasing a decline that followed U.S. Treasury Secretary Scott Bessent’s announcement last month of a buyback program for longer-dated government debt. The yield had initially fallen as low as 4.62% following that announcement before reversing higher.
Gold and Bitcoin Reflect the Same Debasement Trade
Assets tied to the broader debasement trade, investments favored when investors expect currencies to lose purchasing power relative to hard or scarce assets, have pulled back from recent highs alongside the yield reversal.
Gold surged to around $4,700 an ounce before retreating to roughly $4,300, close to where it traded when the Treasury’s buyback program was first announced.
Bitcoin climbed from roughly $64,000 to as high as $81,000 before pulling back to around $76,500. Despite the retreat, Bitcoin remains substantially above the level it traded at before the buyback announcement, suggesting the broader trade has partially unwound rather than fully reversed.
