British 30-year government bond yields surged to their highest since early 1998 on Thursday, following another sharp rise in U.S. Treasury yields even as oil prices steadied on renewed hopes of an end to the Iran war.
Thirty-year gilt yields rose as high as 6.029%, their highest since January 1998, and up 6 basis points on the day, according to LSEG data.
Ten-year gilt yields hit the highest since July 2007, up 8 basis points at 5.510%.
There was also a sharp rise in short-dated gilt yields that are more sensitive to the outlook for interest rates and inflation, with 5-year yields at their highest since July 2008.
Thursday's rise was sharper than in equivalent German Bunds , reminding some analysts of Britain's fiscal vulnerabilities before finance minister John Healey's first budget later this month which is expected to raise taxes.
British government borrowing costs have risen more sharply than those of most other European governments since the start of the Middle East conflict on concerns about the country's reliance on natural gas for its home heating and power generation.
Investors think the central bank is likely to raise interest rates in November or December for the first time since the outbreak of the Iran war and another move is priced in for February.
"The market is priced for quite a lot of interest rate hikes ... I don't think the bank (BoE) wants to hike interest rates because they're looking at household budgets, they're going to be hit by higher food prices, by higher energy prices, all of these things coming down the line," said Jane Foley, head of G10 FX strategy at Rabobank.
