UK Bond Yields Surge to 5.6%, Stirring Memories of 2022 Pension Crisis
Fears over escalating global tariffs have reignited market volatility, pushing borrowing costs sharply higher and unsettling investors worldwide.
On Wednesday morning, the yield on the UK’s 30-year government bond climbed to 5.6%—its highest level since 1998—mirroring a surge in U.S. sovereign bond yields. The spike has fueled renewed anxiety over financial stability, particularly in the UK, where memories of the 2022 pension market crisis still loom large.
The rise in global bond yields is battering risk assets. Since last Thursday, the Nasdaq has plunged 10%, and bitcoin (BTC) has slipped 8% over the same period. In parallel, the UK’s 30-year gilt yield has risen by 8%, while the U.S. 30-year yield is up 12%.
According to ByteTree founder Charlie Morris, the shift in yields is driving investors to reconsider portfolio diversification.
“It appears that the UK has been living beyond its means for too long. It hasn’t balanced its budget since 2001, and the gilt market has had enough,” Morris said. “Investors looking for alternatives will not only turn to gold—but to bitcoin as well.”
The bond market shock is being amplified by uncertainty over global trade policy, as President Donald Trump’s aggressive new tariff proposals roil markets. The potential for widespread supply chain disruption and rising costs is weighing heavily on investor sentiment.
Former UK MP Steve Baker offered a blunt assessment in an interview with CoinDesk.
“Alas, in politics you never get what you want by making civil arguments from high principle,” Baker said. “President Trump said he was using brute economic force—and he is. It’s time to rediscover free trade at home and abroad, fast, before this chaos wrecks our futures.”
The recent spike in gilt yields is drawing comparisons to the September 2022 crisis, when a surprise mini-budget triggered a sudden jump in borrowing costs. That shock exposed vulnerabilities in defined benefit pension schemes reliant on liability-driven investment (LDI) strategies, which used derivatives and leverage to hedge long-term obligations.
As gilt yields soared, these funds faced mounting losses and urgent margin calls, prompting a wave of forced selling into a shallow market. The resulting fire-sale dynamic caused a liquidity crunch that nearly unraveled the UK’s financial system. The Bank of England was ultimately forced to intervene with emergency bond purchases to stabilize the market.
At the time, pension funds held roughly 28% of outstanding gilts. Though the market stood at just $1.5 trillion—far smaller than the $9.9 trillion U.S. Treasury market—its structural fragility was laid bare. A subsequent analysis by the Chicago Fed pointed to excessive leverage, pooled assets, and limited market depth as key contributors to the crisis.
Now, with yields climbing once again and global trade tensions on the rise, investors are watching closely for any signs of history repeating itself.
