Snapshot of UK government bond (known as "gilts") yields: How to Read This Data? How This Affects an Investor's Investments?

26/11/2025

Let's break down the information from the Bloomberg screen and explain its practical implications for an investor.

How to Read This Data

This is a snapshot of UK government bond (known as "gilts") yields at a specific moment in time.

• UK 2-Year Yield: 3.784 (+0.019)

• UK 10-Year Yield: 4.524 (+0.030)

• UK 30-Year Yield: 5.369 (+0.049)

Here's what each part means:

1. The Bond Term (2-Year, 10-Year, 30-Year): This refers to the time until the bond matures. A 2-year bond is a short-term loan to the government, while a 30-year bond is a long-term loan.

2. The Yield (3.784%, 4.524%, 5.369%): This is the annual return an investor can expect to receive if they buy the bond at its current price and hold it to maturity. Crucially, bond prices and yields move in opposite directions. When the price of a bond falls (due to selling pressure), its yield goes up, and vice-versa.

3. The Change (+0.019, +0.030, +0.049): This shows how much the yield has changed from the previous closing level, in percentage points. A positive number means yields have risen today. Since yields rise when prices fall, this indicates that the prices of UK government bonds are falling across the board in this trading session.

Key Observation: The data shows a "steepening yield curve." Yields are rising for all bonds, but they are rising more for longer-term bonds (30-year is up 0.049) than for shorter-term bonds (2-year is up 0.019). The 30-year yield is also significantly higher than the 2-year yield.

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How This Affects an Investor's Investments

Movements in government bond yields are a fundamental driver of all financial markets. Here’s how it impacts different parts of a portfolio:

1. Existing Bond Holdings: NEGATIVE IMPACT

• If you already own UK government bonds (or any bonds with fixed rates), their market value is decreasing today.

• Why? New bonds are now being issued with higher yields (e.g., 4.524% for 10-year). To make your older bond with a lower yield attractive to a buyer, its price must fall until its effective yield matches the new, higher market rate.

2. Stock Market: GENERALLY NEGATIVE PRESSURE

• Higher Discount Rate: Companies are valued on the present value of their future cash flows. Higher bond yields mean a higher "discount rate," making those future earnings less valuable today. This tends to lower stock prices, especially for growth and tech stocks whose valuations are more dependent on long-term earnings.

• Competition for Capital: Why take a risk on a volatile stock if you can get a safe, guaranteed 5.37% from a 30-year government bond? Rising yields make bonds more attractive, drawing money out of the stock market.

• Higher Borrowing Costs: Companies borrow money to expand. Higher interest rates (driven by higher bond yields) make this more expensive, which can hurt their profits and slow down economic growth.

3. Savings and New Investments: POSITIVE for Future Lenders

• If you are looking to buy bonds or put money in savings accounts, rising yields are good news. You can now lock in higher, safer returns for the future.

• Banks will eventually raise the interest rates they pay on savings accounts and certificates of deposit (CDs), as they are influenced by these government bond rates.

4. The Economy: SLOWING EFFECT

• Rising yields make mortgages, car loans, and business loans more expensive. This cools down consumer spending and business investment, which can help control inflation but also risks slowing the economy too much, potentially leading to a recession.

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How to Use This Knowledge Profitably

This isn't just academic; it's a tool for making strategic decisions.

1. Asset Allocation (Where to Put Your Money)

• Scenario: You believe yields will continue to rise (a "bear steepener" as we see here).

  • Action: Be cautious on long-term bonds, as their prices will fall the most. Favor short-term bonds or floating-rate notes, which are less sensitive to rate changes. You might also reduce exposure to expensive growth stocks.

• Scenario: You believe the economy is heading for a slowdown and the central bank will cut rates.

  • Action: Lock in long-term yields like the 5.37% on the 30-year bond if you think they are near their peak. If rates fall later, the price of your long-term bond will rise significantly, giving you a capital gain on top of the high yield.

2. Sector Rotation within Stocks

• Avoid: Sectors that are highly sensitive to interest rates, like real estate (REITs), utilities, and high-growth technology. These typically underperform when yields rise rapidly.

• Favor: Sectors that can benefit from a stronger economy or higher rates, such as financials (banks make more money on the spread between borrowing and lending when rates are higher), energy, and some consumer staples.

3. A Signal for Economic Health

• A steepening yield curve (long rates rising faster than short rates) can signal that investors expect stronger long-term economic growth and/or higher inflation in the future. It's your job to decide if that's a good environment for your specific investments.

4. A Buying Opportunity

• If you are a long-term investor and believe this is a temporary spike, a sell-off in the bond market can be a chance to "buy the dip" and lock in attractive yields for your portfolio's income-generating portion.

Summary

The Bloomberg screen tells you that the UK bond market is selling off today, especially at the long end, driving borrowing costs higher. This is generally negative for existing bonds and stocks in the short term, but positive for savers and new investors seeking yield.

Profitable use of this knowledge involves:

• Understanding the trend: Are yields rising or falling?

• Adjusting your portfolio accordingly: Shift between stocks and bonds, and within those categories.

• Using it as an economic indicator: Gauge the market's expectation for growth and inflation.

Always combine this data with other economic indicators and your own investment goals and risk tolerance before making decisions.

 

What does the bond market turmoil mean for investors?

US Treasuries have suffered the worst start since 1788 after falling by 9.8 per cent this year, triggering experts to question the 60/40 portfolio strategy

The bond market has suffered a record $10 trillion sell-off this year. AP

Harvey Jones

Jul 05, 2022

Investors fretting over this year’s $13 trillion global stock market crash may have overlooked similar carnage in a market that is actually more important for the global economy.

The bond market has also suffered a record $10tn sell-off and this could hit investors just as hard because a strange thing is happening.

Both shares and bonds are crashing at the same time. That is something financial experts say isn’t supposed to happen.

But in 2022, it is. Which means there is no hiding place for investors in this troubled year. There may also be an opportunity, if you are sharp.

Retail investors may pay little attention to the bond market but institutions and governments have been known to obsess over it.

For them, the bond market is the big one. It is about triple the size of the global stock market and plays an essential role in keeping economic activity ticking. At the end of last year, the bond market was worth about $120tn, against $41.8tn for global shares.

If the bond market gets bumpy, everybody is in for a rough ride.

Governments issue bonds to raise money for their spending while companies use them to generate the funds they need to grow. Both promise to pay investors a fixed rate of interest over a preset term, with a guarantee to return their original capital afterwards.

At maturity, the issuing government or company must repay the debt. If it cannot, there is trouble.

Bonds are traded by investors, which means their value can constantly change, depending on factors such as inflation, interest rates and demand. As is the case with shares, bond prices can rise and fall. Just not as much. Usually.

Ordinary investors rarely buy individual bonds but invest through a fund holding a spread of government or corporate bonds.

Bonds offer them a fixed rate of interest plus capital growth if prices rise, with fewer of the ups and downs you find with shares.

The two are supposed to be non-correlating assets. So, when shares fall, bonds are supposed to mitigate losses by standing firm.

The one thing they are not supposed to do is crash simultaneously. Yet, that is what is happening right now.

In doing so, they have destroyed a golden rule of portfolio planning.

For decades, financial planners said the safest way to generate steady, strong long-term returns is to invest 60 per cent of your money in shares and 40 per cent in bonds.

The classic 60/40 portfolio strategy has generated an impressive average return of 11.1 per cent a year over the past decade.

You can even buy exchange-traded funds (ETFs) that automatically deliver this, such as the BlackRock 60/40 Target Allocation Fund or the Vanguard 60% Stock/40% Bond Portfolio.

The writing was on the wall for the 60/40 strategy last year, as US large-cap stocks hit record-high valuations, while US Treasury government bond yields neared record lows.

“For all intents and purposes, we think investors have many reasons to be concerned that the 60/40 might be dead,” Nick Cunningham, vice president of strategic advisory solutions at Goldman Sachs Asset Management, said last October.

This will hit investors who had even never heard of the 60/40 rule because “we see shades of the classic 60/40 present in many portfolios due to an over-concentration in the most familiar asset classes", Mr Cunningham added.

As this warning proves prescient, it may be worth looking at your portfolio to see how exposed you are to this double jeopardy.

This has been a challenging year across the board, says Jason Hollands, managing director of investment platform Bestinvest.

“2022 has seen one of the worst starts to a calendar year for core US assets on record,” he says.

US Treasuries have suffered the worst start to a year since 1788, according to Deutsche Bank, falling 9.8 per cent. Bloomberg

US Treasuries have suffered the worst start since 1788, according to Deutsche Bank, falling by 9.8 per cent. That isn’t supposed to happen to the bond market.

“At the same time, the S&P 500 Index of US shares has fallen 20.38 per cent, the worst first half for US equities since the Great Depression in 1932,” Mr Hollands says.

This is happening because central banks, led by the US Federal Reserve, are throwing monetary policy into a sharp reverse.

After decades of slashing interest rates and pumping out stimulus, they are tightening as fast as they dare to curb inflation.

“Central bankers have now yanked away the key supports for equity and bond markets that turbocharged them in 2020 and 2021,” Mr Hollands says.

Rising interest rates are bad news for shares because higher borrowing costs squeeze both businesses and consumers, hitting profits.

Bonds suffer because they pay a fixed rate of interest, which looks a lot less attractive when rates are rising and investors can earn higher yields elsewhere.

The stock and bond sell-off isn’t over yet despite signs of a recovery in recent days, says Fawad Razaqzada, market analyst at City Index and Forex.com.

Optimists convinced themselves that the Fed would curb rate increases for fear of tipping the US into recession, but this is a misreading.

“The Fed is in a hawkish mood. I think the start of another equity and bond market sell-off is nigh,” Mr Razaqzada says.

It is not all bad news, though.

Bonds do this odd thing that sometimes confuses private investors. When bond prices fall, yields rise.

While the bond price crash is bad news for existing holders, new bond investors are earning a higher rate of income. Yields on 10-year Treasuries have almost doubled from 1.63 per cent to 3.06 per cent this year.

Stock and bond market crashes have one thing in common. Both can throw up opportunities for forward-looking investors.

The Fed will continue to raise rates this year but it also wants room to cut when the US economy slips into recession as a result, probably in 2023, says Lisa Emsbo-Mattingly, managing director of asset allocation research at Fidelity Investments.

“If inflation comes down, real rates, which are yields minus the rate of inflation, could rise further into positive territory after being below zero for the past two years,” she says.

This would allow government bonds to carry out their old job of providing a steady level of income for lower-risk savers and pensioners. Bonds could then start making a meaningful contribution to that balanced 60/40 portfolio split again.

Bonds are cheaper than they were after this year’s dip and are starting to look better value for money.

It could soon be time to start buying bonds again, ideally before the Fed starts cutting rates next year to reverse the recession, at which point bond yields will fall again, Ms Emsbo-Mattingly says.

“But the window of opportunity for yield-seekers may be brief,” she says.

There are hundreds of bond ETFs to choose from, including iShares Core 1-5 Year USD Bond ETF, iShares Global Government Bond UCITS ETF (IGLO) or db x-trackers II Global Government Bond UCITS ETF.

Accurately timing bond fund purchases is no easier than timing the stock market, yet recent volatility is throwing up an opportunity.

It may even make bonds exciting.

Updated: July 05, 2022, 1:00 PM

https://www.thenationalnews.com/business/money/2022/07/05/what-does-the-bond-market-turmoil-mean-for-investors/?utm_source=paid+google&utm_medium=paidsearch&utm_campaign=us+uk+always+on&utm_term=&gclid=Cj0KCQjwtsCgBhDEARIsAE7RYh1ru7FE_OrhxgydUWGygjSPzvR2gW8TwdoBc7cuP1pnWRt4dXjGcFYaAslIEALw_wcB

Relationship between Price and Maturity of Bonds

If the yield remains constant:

• A premium bond's value decreases towards par as it nears maturity.
• A discount bond's value increases towards par as it nears maturity.
• A par bond's value remain unchanged as it nears maturity.

Important Relationships of Fixed Income Securities (Bonds)

Defining the Elements of a Bond

Coupon rates and bond prices

The higher the coupon rate on a bond, the higher its price.

The lower the coupon rate on a bond, the lower its price.


Interest rates and bond prices

An increase in interest rates or the required yield on a bond, will lead to a decrease in price.

A decrease in interest rates or the required yield on a bond will lead to an increase in price.

That is, bond prices and yields are inversely related.


Bonds risks and bond yields 

The more risky the bond, the higher the yield required by investors to purchase the bond, and the lower the bond's price.

Dividends, Dividend Yield and Bond Yield