It has been an eventful week. Rumours of US president Donald Trump’s death over the weekend (including the topic trending on social media site X) coincided with the news that his tariffs were considered illegal by a court.
Now the president – who is very much still alive – is asking the US supreme court to overturn the decision and allow his provocative trade negotiating tactic to continue.
In the UK, prime minister Keir Starmer has undermined his chancellor Rachel Reeves by bringing in economic advisers to help with this year’s Budget, which was announced to be later than usual, with a date set for 26 November.
Meanwhile, there was the quarterly FTSE reshuffle, with fashion house Burberry and energy firm Metlen Energy & Metals joining the large-cap elite.
However, perhaps the biggest news story – certainly to domestic investors – has been the sell-off of UK government bonds (known as gilts).
On Tuesday, the yield on a 30-year gilt rose by 9 basis points to 5.73%, the highest they have been in almost three decades (since May 1998). At the time of writing, they have since fallen back to 5.58%.
There are two schools of thought on why the gilt market has dropped in recent days. The more optimistic view is that it is part of a wider sell-off among global bonds.
Longer-dated bond yields across the world have been volatile recently, despite a series of weaker economic data releases across Europe and the US.
Germany's 30-year yields hit their highest level since 2011, while the potential collapse of the French government if prime minister Francois Bayrou fails to win a vote of confidence contributed to uncertainty on the continent.
Similarly, in the US, threats made by Trump to fire Federal Reserve governor Lisa Cook has left many to question how independent the central bank will be moving forward. US 30-year yields also rose 15 basis points over the past month to 4.89%.
However, the pessimistic take on UK gilts is that the market is telling the UK government exactly what it thinks of the fiscal situation the country finds itself in.
Jack Johnson, fixed income fund analyst at FE Investments, said this was the most likely reason, with bond investors showing a lack of confidence in UK fiscal policy ahead of the delayed Budget.
“Additional potential pressures may be compounded by the progress of the employment rights bill, with possible inflationary impacts from additional employer costs passed on to consumers,” he added.
Chris Beauchamp, chief market analyst at IG, said bond investors “seem to be sending a message to the UK government” that its current refusal to raise taxes to bring down the deficit is not acceptable.
There are solutions to this. Part of the problem is that the market does not believe the government has the ability to find money from elsewhere to reduce its fiscal problems and so will require further borrowing to get more cash to make interest payments.
Therefore, signs the government is willing to raise revenue elsewhere will appease the bond market – at least in theory.
One would be to hike taxes, either through upping VAT, income tax or inheritance tax, although Labour have previously rejected this option.
Capital gains tax (CGT) could be the way the chancellor goes, with AJ Bell head of investment analysis Laith Khalaf stating Reeves “may have unfinished business” with the tax.
“Having pushed rates up a bit in the previous Budget, the chancellor may be tempted to engage in a more full-blooded attack on asset gains to drive some much-needed revenue for the exchequer,” he said.
In dire circumstances, the pension triple-lock, which guarantees the state pension will rise each year by the highest of either the previous September's consumer prices index (CPI) inflation, average earnings growth or 2.5%, could also be under threat.
It is clear – markets are unhappy. The government is in a bind and needs to find a way to generate cash fast or risk crippling the long-term potential to borrow.
The next Budget could be key for not just the next 12 months or the full term in power, but for the UK for decades to come.