Burden of gilt on Reeves

FIVE-MINUTE GUIDE TO... GILTS AND GILT YIELDS

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THE NEXT Budget is just days away and whatever Rachel Reeves decides to do with tax, one thing is certain: there will be an awful lot of talk about gilt yields.

Those two words were on everybody's lips after the Liz Truss mini-Budget disaster in September 2022, when markets reacted badly and gilt yields rocketed, driving mortgage rates upwards and causing a run on the pound.

Gilt yields can make or break a government, and if they soar again it could spell serious trouble for the Chancellor.

Yet they're complicated things, and many people don't understand what affects them. A little knowledge today could come in handy next week.

Gilts are simply loans to the government, with investors receiving interest and their money back at maturity.

They may be classed as low-risk, but their prices and yields can still move sharply.

Yields spiked last week on reports that the Chancellor had ditched plans to increase income taxes, making it harder to balance the books.