UK Gilts 2025: Lessons on Trust

Due to a sudden health issue, the 7th article on CoreWeave is delayed and will be posted this evening. On behalf of Viet Hustler, Steve apologizes to readers for the above incident.

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“When it comes to public finances, credibility is key.”

“Fiscal credibility is not words in the law—it's the interest rate you have to pay tomorrow morning.”

— The IMF once emphasized that just trust in the budget plan alone can help reduce borrowing costs by up to 40 bps. But in London 2025, the picture is reversed: gilts are bearing the highest premium in the G7, as if the market is “punishing” the UK for lacking a convincing fiscal story.

Autumn 2025, London becomes the epicenter of global bond market tension again. 30-year gilts yields hit 5.75% – highest since 1998 – while the pound slides the most in months. Chancellor (Chancellor of the Exchequer - temporarily translated as UK Treasury Secretary) Rachel Reeves enters the Autumn Budget in a dire dilemma: borrowing interest costs ballooning, budget headroom shrinking, market confidence fragile after every Labour internal politics flare-up.

In a tense parliamentary session ahead of the Autumn Budget, television cameras captured the moment Chancellor Rachel Reeves in tears behind Prime Minister Keir Starmer. It was not just a symbol of personal pressure, but also an image projecting fiscal impasse: spending cuts face party opposition, tax hikes betray the manifesto, additional borrowing sees the market immediately punish with yield.

Once considered a “safe haven” on par with Treasuries (US) or Bunds (Germany), gilts are now called “the sick man of the G7”: vulnerable, overreacting to any government slip-up. The US has USD as global reserve currency, Japan has mountains of domestic savings, while the UK must borrow on international markets – direct competition in a high interest rate world with increasingly selective capital flows.

The ghost of the 2022 mini-budget still haunts: just one spending or tax misstep is enough to make gilts jump tens of basis points, dragging the pound, housing market, and even FTSE 100 (UK's main stock index - akin to S&P 500) into turmoil. For investors, UK fiscal trust is not measured by “fiscal rules” on paper, but by the yield curve the next morning.

In this article, VietHustler dives deep into:

1. UK Fiscal Picture 2025 – high debt, sticky inflation, and interest costs erosion.

2. Why gilts became the “sick man” of the bond market – four daggers stabbing the yield curve simultaneously.

3. Crisis roots – reliance on foreign capital, unfavorable debt structure, interest cost doom loop.

4. Way out for gilts – smarter issuance, genuine fiscal discipline, and long-term productivity boost.