Bond Vigilantes Win in the UK

October 17, 2022

Bond Vigilantes Win in the UK Photo

Financial markets are responding favorably to news coming out of the United Kingdom (U.K.) this morning, which puts recently proposed plans to cut income taxes on ice indefinitely. This news marks a significant victory for bond vigilantes who have been emboldened recently by the surge in inflation across the globe. 10-year U.K. Gilt yields are more than 40 basis points (bps) lower this morning and down 125 bps since touching 4.5% in late September.1 Following 11 consecutive weekly increases in 10-year Treasury yields, U.S. investors are looking for some light at the end of the tunnel following this year’s record-setting bond market selloff. 2 

This week’s economic calendar is relatively light with new housing data, including the Housing Starts release on Wednesday and the Existing Home Sales release on Thursday, taking center stage. 3 The Federal Reserve will welcome additional signs of cooling in the housing market as 30-year mortgage rates approach 7%, the highest level we’ve seen in 20 years. 4  



1 Source: CNBC- U.K. GILT; as of 10/17/22

2 Source: CNBC- U.S. Treasury; as of 10/17/22

3 Source: MarketWatch- U.S. Economic Calendar; 10/17/22

4 Source: FreddieMac- U.S. Mortgage Rates; as of 10/17/22


Tags: Bond vigilantes | U.S. markets | U.K. markets | Existing home sales | Housing Starts

< Go to Monday Morning Perspectives

This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.

Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client.  Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.

Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice.  The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete.  Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements.  Actual results may differ significantly.  Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.

Investing involves risk, including possible loss of principal.  Past performance is no guarantee of future results.  All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.

High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.

All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.

Subscribe to Our Publications