Liz Truss warns bond rout may lead to emergency spending cuts

Of all the people to warn about a bond market crisis, Liz Truss might be the most qualified. Or the least, depending on your perspective. The former UK Prime Minister, whose 49-day tenure in 2022 became synonymous with bond market chaos, is now cautioning that surging gilt yields could force the current Labour government into emergency spending cuts. UK 30-year gilt yields have climbed to 5.89% as of early September 2026, their highest level since 1998, while 10-year yields have approached or exceeded 5.2%. A crisis with a familiar shape When Truss and her Chancellor Kwasi Kwarteng introduced £45 billion in unfunded tax cuts on September 23, 2022, the bond market’s response was swift and brutal. The Bank of England was forced into a £65 billion emergency gilt-purchasing program to stabilize pension funds caught in a doom loop of forced selling. Bank of England analysis later attributed roughly half of that 2022 yield spike to liability-driven investment (LDI) pension fund deleveraging. Think of it like a margin call across the entire UK pension system, where funds that had used leverage to match their long-term liabilities suddenly needed to dump gilts into a falling market, making...