UK vs G7

Each line is a government borrowing in its own currency, at the maturity selected above. The UK line is a semi-annual par yield, the coupon a new gilt of that length would carry, calculated from the Bank of England's spot curve. The US line is the Treasury constant-maturity par yield. Japan's is a semi-annual compound yield read off its curve at an exact maturity. Germany's is an annual-coupon par yield. France's is the Banque de France constant-maturity TEC. Canada's is the yield of one benchmark bond that matures near that term. On the 30-year chart that Canadian line is the long-term benchmark, a chosen bond, where the others are fitted to 30 years. Italy's is the gross yield of the benchmark BTP in that bucket. The bond changes when a newer one becomes the most traded. The 2-year chart leaves Italy off, because the short benchmark in that table is the 3-year.

A few hundredths of a percentage point, sometimes a tenth, comes from those coupon conventions. A gap of that size is the convention. A larger gap is the market.

In 2025 the UK imported 43.3% of the energy it used. More than nine-tenths of the energy the UK imports is oil and gas, and Norway supplies the largest share of the gas. Gas was the largest single source of electricity generation, 31.8%, just ahead of wind at 29.5%. A jump in the wholesale gas price therefore lands on the inflation basket, and on the path markets expect for Bank Rate.

The United States and Canada produce oil and gas. For them the same price spike is a change in the value of domestic production. France generates very little of its electricity from fossil fuels. Provisional Eurostat figures cited by the Department for Energy Security and Net Zero put fossil fuels at about 4% of French generation in 2025. 2022 was also the year French reactors were offline and Britain exported power into that shortage, so the nuclear fleet was only a partial shelter that year. Japan imports its fuel. Until March 2024 the Bank of Japan kept the ten-year yield inside a band: energy prices moved, and the yield stayed inside it. The Japanese line is still the low one after that band was removed, and it has risen on its own path. Britain does not pin a yield.

That is the sense in which the gilt market is treated as more vulnerable to energy prices. It is why the two-year gilt, the tenor that mostly tracks the expected path of Bank Rate, was repriced in 2022 and 2023. Where the ten-year gilt sits once gas prices have fallen back is a separate question, and it is the one below.

The UK premium is the gap against the United States and against the safest euro-area governments, Germany, the Netherlands and Luxembourg. That is the ECB's AAA curve. France and Italy are separate governments, with their own yields, and they are on this chart.

Two pieces of that gap are already separated there. The two-year gap mostly tracks what markets expect central banks to do. What remains at longer maturities is the extra paid to borrow for longer. Above the sterling overnight-index swap, the ten-year gilt also carries the extra for how many gilts are being issued, for the Bank's sales out of the Asset Purchase Facility, and for dealer balance sheets. Those three stay in one slice.

The long end was built for defined-benefit pension funds. The stock they hold is still large. The bid for the next gilt is thinner than it was. Japan's low yield is a peg, and then the exit from that peg. The long gilt is a different market: the holders are still there, and the marginal buyer is harder to find.

On 23 September 2022 the gilt yield jumped on a day the US Treasury and the safest euro-area bonds did not match. The announcement was the mini-budget. In the decomposition used on this site, that day's ten-year move was almost all the expected path of short rates. The term premium widened in the days after. The marker on the chart is that day.

Overseas holders are about a third of the market value of gilts, which is set out on who owns it. A holder who can sell is a channel for a move. A large index-linked stock means an inflation surprise also raises the RPI uplift on the interest bill, which is the subject of expected inflation The conventional yield already contains the inflation buyers have allowed for. The uplift is the cash consequence for the public finances, visible in how much falls due.

How Bank Rate reaches the economy, and how it meets the gilt curve, is on the Bank of England.