On Wednesday morning, the yield on the 30 -year state obligation in the United Kingdom has climbed to 5.6% – it has been the highest since 1998 – in the miroration of a broader increase in American sovereign yields and by arousing new concerns concerning the stability of the financial market.
The rise in global bond yields exerts a significant drop in risk assets. Since the start of the sale of American shares last Thursday, the NASDAQ has dropped by 10%, while Bitcoin (BTC) has been slightly better, down 8% over the same period.
At the same time, the return on bonds in the United Kingdom to 30 years has increased by 8%, while the 30 years of US increased by 12%. Charlie Morris, founder of Bytreetree, believes that investors will begin to seek diversification in other assets, including Bitcoin.
“It seems that the United Kingdom lives beyond its means for too long. It has not balanced its budget since 2001, the golden market has enough,” said Morris. “Investors who are looking for the diversification of financial assets will buy not only gold, but also bitcoin”.
The dramatic peak of yields relaunched disturbing memories of the UK’s pension crisis in 2022, when a sudden increase in loan costs sparked a quasi-intake of the financial system and finally cost the Minister of the then, Liz Truss.
This last torment of the bond market is motivated by the climbing of uncertainty around world trade, fueled by the tariff plans proposed by President Donald Trump. These samples could disrupt global supply chains and increase costs, adding pressure to the already nervous markets.
“Alas, in politics, you never get what you want by making civil arguments from a high principle,” former British MP Steve Baker told Coindesk in an exclusive interview. “President Trump said he used raw economic force – and it is time to rediscover free trade in the country and abroad, quickly, before this chaos destroyed our future.”
The recent increase in return echoes the events of 2022, when a surprise ad from the Mini-Budget on September 23 increased golden yields, crashed and exposed deep vulnerabilities in the British retirement system.
Many pension plans defined by benefits had adopted investment strategies focused on complex responsibility (LDI), using the leverage and derivatives to correspond to long -term liabilities. But as yields have increased, these funds have undergone massive losses of brand to market and have faced margin calls, forcing fast golden sales in a thin market and creating a defective “feedback” loop.
At the time, British pension funds held around 28% of the golden market. The chaos that followed, occurring in a modest market of 1.5 billion of dollars, was so serious that it forced the Bank of England to intervene with golden emergency purchases to stop the downward spiral. A Letter from the Chicago Fed The analysis of the crisis later identified the excessive lever effect, the pooling of assets and the limited depth of the golden market as key structural weaknesses, unlike the US treasury market of 9.9 billions of dollars much greater.
