30 year bond yield at 5.64 %

The situation in the UK is getting scary.

The UK's bond market is collapsing:
Today, the yield on a 30Y Bond in the UK rose to 5.64%, its highest level since 1998.
Yields in the UK are now 15 TIMES higher than they were at the 2020 low, just 5 years ago.

Most people don't realize just how bad the fiscal picture is for the UK.
Spending is set to cross 60% of GDP, compared to 53% during the pandemic.
Meanwhile, revenue as a % of GDP is set to drift slightly lower, below 40%.
This is the UK government's OWN forecast.

As a result, the UK is facing a mountain of national debt. By 2073, the UK's debt is on course to be 274% of GDP. This would imply a deficit that is running at a massive 21% of GDP. Interest on this debt ALONE would be equal to ~13% of GDP.

This is a fiscal collapse.

Meanwhile, inflation is back on the rise, and it's rising sharply. CPI inflation in the UK hit 3.8% in July with expectations of 4%+ coming in August. This puts inflation at DOUBLE the level that the Bank of England is targeting.
And, here's where it gets even worse.

Even as deficit spending soars and inflation rebounds, the BOE is CUTTING interest rates, now down to 4%.

Why?

The BOE is calling some of its inflation drivers "transitory”. But, in reality, economic growth has become so weak in the UK that they have no other option.

Other nations follow

Right now the 30year yield on bonds in Japan and the USA are rising sharply too. They’re all in the same boat. Excessive deficit spending has caused this! And we can’t keep on borrowing our way out of this without creating Argentina scenario’s.

Sincerely,

Pele23

Posted Using INLEO