The 30-year gilt yield briefly rose above 6% earlier this month. City AM reported that it reached 6.04% in early trading, the first time it had been at 6% since 1998.
Higher borrowing costs bear on the room the Chancellor, John Healey, has against his fiscal rules. City AM reports that RSM and other City firms suggest higher rates could cut about £9bn from the headroom, which stood at £23.6bn in March. Economists cited by City AM say a one percentage point rise in rates adds about £15bn to costs by 2031.
The IFS says 30-year gilt yields rose from about 5.2% before the Spring Forecast to 5.9% on 2 October. Over the same period, 10-year yields rose from 4.4% to 5.4%.
The IFS figures do not show the UK as an outlier. It says 30-year gilt yields are up around 0.6 percentage points over the year, against 0.7 to 1 percentage point for comparable sovereign bonds. On that measure the UK rise is in line with, or slightly smaller than, rises in other major economies. The IFS also says the risk of a domestic catalyst for a gilt crisis has fallen.
The £9bn headroom estimate comes from City firms and has not been independently checked.