The UK bond market has reached a historic high, sparking concerns about financial market stability and echoing memories of the 2022 pension crisis. As global turmoil intensifies, investors are seeking diversification into alternative assets like bitcoin.
The yield on the UK‘s 30-year government bond has surged to its highest level since 1998, sparking fresh concerns about financial market stability and reviving memories of the ‘2022 pension crisis’.
The UK bond market, also known as the gilt market, is a significant component of the country's financial system.
It provides a platform for governments and corporations to raise funds by issuing bonds to investors.
The market is overseen by the Bank of England and features a wide range of bond types, including government bonds, corporate bonds, and mortgage-backed securities.
As of 2022, the UK bond market has a total value of over £1.5 trillion, making it one of the largest in Europe.
Escalating uncertainty around global trade, driven by President Donald Trump‘s proposed tariff plans, is rattling bond markets. These levies could disrupt global supply chains and increase costs, adding pressure to already jittery markets. As a result, investors are seeking diversification into other assets, including bitcoin.
Donald Trump was born on June 14, 1946, in Queens, New York.
He graduated from the University of Pennsylvania with a degree in economics.
Before entering politics, he built a business career as a real estate developer and television personality.
Trump served as the 45th President of the United States from 2017 to 2021.
During his presidency, he implemented policies on immigration, trade, and healthcare.
He also faced controversy over his handling of the COVID-19 pandemic and allegations of obstruction of justice.
Charlie Morris, founder of ByteTree, believes that investors will start to seek diversification into other assets, including bitcoin. ‘It appears that the UK has been living beyond its means for too long,’ Morris said. ‘The gilt market has had enough.’ Investors seeking diversification away from financial assets will not only buy gold but also bitcoin.
The recent yield surge echoes the events of 2022, when a surprise mini-budget announcement sent gilt yields soaring, crashed the pound, and exposed deep vulnerabilities in the UK pension system. Many defined benefit pension schemes had adopted complex liability-driven investment strategies, using leverage and derivatives to match long-term liabilities. However, as yields spiked, these funds suffered massive mark-to-market losses and faced margin calls.
The UK pension system is a government-funded program that provides financial support to individuals in their retirement.
It consists of two main components: State Pension and Workplace Pensions.
The State Pension is a guaranteed minimum income for eligible citizens, while Workplace Pensions are employer-sponsored schemes that offer additional benefits.
In 2020, the average annual State Pension payment was £6,300, with over 12 million people receiving some form of State Pension.
Workplace Pensions have seen significant growth in recent years, with over 10 million members contributing to their retirement funds.
Former UK MP Steve Baker told CoinDesk that President Trump‘s use of ‘brute economic force’ is not an effective way to resolve issues. Instead, it’s time to rediscover free trade at home and abroad, fast, before this chaos wrecks our futures.
Bitcoin can serve as a diversifying asset in portfolios amid rising global bond yields. As the yield on the UK‘s 30-year government bond soared to 5.6%, bitcoin fared slightly better, down 8% over the same period.
