---
title: "The tariff shockwave sweeps across the global bond market, with borrowing costs in the UK reaching a 27-year high"
description: "As U.S. long-term interest rates soar, borrowing costs in the UK have reached their highest level since 1998, with the 30-year government bond yield rising by 16 basis points in a single day to 5.51%."
type: "news"
locale: "en"
url: "https://longbridge.com/en/news/235196780.md"
published_at: "2025-04-09T10:03:51.000Z"
---

# The tariff shockwave sweeps across the global bond market, with borrowing costs in the UK reaching a 27-year high

> As U.S. long-term interest rates soar, borrowing costs in the UK have reached their highest level since 1998, with the 30-year government bond yield rising by 16 basis points in a single day to 5.51%. The exchange rate of the British pound against the euro has fallen to a one-year low, reflecting market pessimism about the UK economic outlook. Economic uncertainty triggered by the global tariff war has led investors to sell off risk assets, putting dual pressure on the UK bond market, where long-term bond yields continue to climb, while short-term debt is supported by expectations of interest rate cuts

According to Zhitong Finance APP, as a chain reaction caused by the surge in long-term interest rates in the United States, borrowing costs in the UK have reached their highest level since 1998. Specifically, the yield on UK 30-year government bonds soared by 16 basis points in a single day, reaching an astonishing level of 5.51%, breaking through the decades-high point set in January. Meanwhile, the exchange rate of the pound against the euro has fallen to its lowest point in the past year, highlighting the market's pessimistic outlook on the UK economy.

The source of this bond market storm points directly to the global tariff war ignited by the White House. The Trump administration's sudden imposition of "reciprocal" tariffs on over 60 trade surplus countries has completely disrupted expectations for global economic growth and spending. In response to uncertainty, investors have been selling off risk assets to cash out, leading to long-term bonds being the first to be affected—these assets are most sensitive to inflation expectations and policy changes. Funds have begun to seek new safe havens, with the European market unexpectedly becoming an important destination for capital migration, but within this oasis, the UK bond market is showing a contrasting pressure scenario.

It is understood that the pressures facing the UK bond market are dual: on one hand, since Chancellor of the Exchequer Reeves announced an expansion of the borrowing plan last October, the yield premium on long-term bonds has continued to rise, accelerating this month to break through the peak since 2017; on the other hand, short-term debt has been supported by market expectations that the Bank of England may cut interest rates, but long-term bonds have to digest the supply pressure brought by the government's massive bond issuance. This distortion in the term structure reflects deep concerns in the market about the sustainability of UK finances.

In the currency market, the euro staged a surprising comeback. Although Europe has faced more direct tariff impacts than the UK, the euro has unexpectedly strengthened against the dollar, climbing 0.5% on Wednesday and briefly breaking through 0.86 pounds, reaching its highest level since April 2024.

At the same time, the options market's barometer, the "one-month risk reversal" indicator, shows that investor preference for the euro has reached its strongest level since late January this year. Behind this unusual phenomenon is a reassessment of the attractiveness of dollar assets—the tariff policy is shaking international capital's faith in the "safe haven" status of US Treasuries.

In contrast, the German bond market presents a stark contrast. The yield on 10-year government bonds fluctuated between 2.618% and 2.675% on Wednesday, ultimately closing at 2.618%, a slight decline of 1 basis point from the previous trading day.

It is noteworthy that on the day of the epic sell-off of US Treasuries, German bonds also could not remain unscathed, with prices being significantly dragged down, indicating that traditional safe-haven assets are facing a "crisis of trust" in extreme risk events. However, as the market increases its bets on the European Central Bank cutting interest rates, short-term bond prices have risen against the trend, and the yield curve has shown a steepening trend.

Currently, Trump's tariff offensive continues to escalate, with measures to impose tariffs on dozens of countries, including China, officially implemented on Wednesday. The Chinese Ministry of Commerce responded firmly, clearly stating its unwillingness to engage in a trade war, but also warning that if the US continues to escalate the confrontation, China will take necessary countermeasures. This policy standoff has intensified uncertainty in the global market, making it difficult for investors to choose between safe-haven assets and cashing out It is worth mentioning that the wave of basis trading liquidation has become the "catalyst" for this round of turmoil in the bond market. Hedge funds, which built an $800 billion position based on the price difference between spot and futures, were forced to liquidate on a large scale after the sharp drop in U.S. Treasury prices triggered margin calls, creating a vicious cycle.

Apollo Global Management's chief economist, Slok, warned: "These high-leverage positions are like ticking time bombs; any external shock could trigger a chain reaction."

In addition, the divergence in global central bank policies further stirs the market. There are disagreements within the European Central Bank on how to respond to tariff shocks: one side believes that interest rate cuts should be accelerated to address growth pressures, while the other side worries that tariffs will raise inflation and constrain policy space.

Dutch Central Bank Governor Klaas Knot pointed out that tariffs could trigger the risk of "stagflation"—the coexistence of rising inflation and economic stagnation. The money market has fully priced in the expectation of a 25 basis point rate cut by the European Central Bank in April, while just earlier this week, the probability of reaching that expectation was still below 85%.

In the U.S. Treasury market, yield fluctuations are nearing an uncontrollable state. The yield on the 10-year Treasury surged 11 basis points in a single day to 4.367%, accumulating an increase of over 40 basis points from this week's low, with the spread against German bonds widening to 174 basis points.

This bond market storm triggered by tariffs is reshaping the global financial landscape. As "risk-free assets" begin to bear risk premiums, and traditional safe havens turn into storm centers, investors are forced to seek new directions amid the chaos

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.