Nigel Green, CEO of deVere Group, one of the world’s largest independent financial advisory and asset management organisations, has warned that UK gilts could become the weakest link in an intensifying global bond sell-off. deVere Group offers a comprehensive suite of financial services to international clients. Green’s caution comes as a fresh downturn sweeps global government bond markets, pushing borrowing costs to multi-decade highs. This follows the collapse of hopes for an end to Middle East hostilities, pulling gilts higher in sympathy with US Treasurys. Green noted that while every government bond market is exposed, Britain faces dual vulnerabilities. The consistent trigger involves a ceasefire window that shut, an attack on shipping in the Strait of Hormuz, oil prices pushing back above $90, and resurfacing inflation fears.
The breakdown of the Washington and Tehran ceasefire, coupled with a vessel being struck in the Strait of Hormuz, has revived fears over a crucial global energy trade route. Consequently, 30-year US Treasury yields have reached their highest since 2002, with 10-year yields touching levels last seen in 2007. Green emphasised that gilts will not be immune, noting UK 10-year borrowing costs have already breached 5% twice this year on similar Iran-related dynamics. He argues the UK carries structural weaknesses its peers largely do not, including public sector debt near 95% of GDP. Debt interest alone now consumes over 100 billion pounds annually, representing one of Britain’s heaviest debt-servicing burdens in half a century, with limited fiscal margin beneath its debt pile.
A second, technical vulnerability sets gilts apart: nearly a quarter of the market is inflation-linked, the largest share among major developed economies. Green explained that an oil shock automatically raises the government’s interest bill on this index-linked debt in real-time. He estimates roughly two-thirds of the jump in 10-year gilt yields after an inflation shock stems from investors demanding greater compensation to hold UK debt, a penalty not paid similarly by Washington or Frankfurt. This leaves the Bank of England with an uncomfortable choice: weak growth points to rate cuts, while an oil-driven inflation spike suggests the opposite. Markets have swung from pricing cuts to pricing hikes within months, a combination that has historically punished sterling and gilts severely. Green concluded that investors assuming an even impact of a global bond shock are misreading the situation. Britain faces more debt, less fiscal headroom, and a bond market that reacts more violently to inflation, making gilts “close to its centre.”
