Gilt rush: retail investors pile in as UK govt borrowing costs hit 28-year highs

Ordinary investors have piled into UK government bonds so far in 2026, as yields for Gilts climb to levels not seen in years, with investment platforms reporting record trading activity during recent market volatility.

The yield on the UK 10-year gilt has risen from around 4.5% at the start of 2026 to above 5% this week, while the 30-year gilt briefly hit 5.8% – its highest level since 1998.

Bond yields move inversely to prices. The rise in yields reflects institutional investors selling gilts, pushing prices down and therefore yields up, which conversely brings in demand from other investors.

There has been a sell-off in UK and global government bonds driven by a mix of inflation fears linked to the US and Israel’s war on Iran, stemming from the rising oil and gas prices, as well as growing political uncertainty in the UK.

Buying opportunity?

Retail investors appear to have viewed the weakness as a buying opportunity.

Hargreaves Lansdown, the largest retail investors platform in the country, said March was the busiest month on record for gilt trading on its platform, with the highest number of individual buys and sells ever recorded in a single month.

Hal Cook, senior investment analyst at HL, said the conflict in the Middle East “was a clear driver of additional interest in gilts”, alongside tax year-end positioning.

He added that higher yields and the potential for capital gains had boosted demand, particularly as directly owned gilts are exempt from capital gains tax.

HL, which has around two million clients, said average monthly gilt-buying trades in the year to date are 26% above 2025 levels, while the value of assets traded is up 46%. Selling activity has also increased sharply.

Freetrade, which has 1.6 million users, reported a 193% jump in gilt buying value between January and April. “Retail investors have been buying that weakness,” said spokesman Alex Campbell.

He added investors are trying to judge whether the recent gilt sell-off reflects “a passing panic” over Labour’s fiscal stance or “more deep seated concerns about the direction of inflation”.

Buying levels were quite steady week-on-week for the last couple of weeks, Freetrade said, with the high coming in the week beginning 13 April, the week before gilt yields reached their recent peaks.

UK political angle

Yields have risen more in the UK than in other countries, which has ramped up as pressure has grown on Prime Minister Sir Keir Starmer, even more so ahead of today’s local government elections.

Jason Hollands, managing director at Evelyn Partners, said the local elections are expected to deliver “a bruising outcome” for both Labour and the Conservatives.

He said markets are focused on what the results mean for the PM, adding that “political uncertainty is always a factor in how international investors assess the UK’s prospects”.

Gilt yields have moved notably higher in the past year whenever there has been a threat to Starmer or his Chancellor, Rachel Reeves, driven by worries over who could take their place and potentially choose a looser fiscal stance.

AJ Bell analyst Danni Hewson said: “A new PM would likely mean a new chancellor,” warning that markets may fear higher borrowing and spending at a time of weak growth.

She added that rising yields are “far from just being numbers on a spreadsheet”, as they increase the cost of servicing the UK’s debt pile and limit the government’s room for manoeuvre.

The economics team at Berenberg is expecting “major losses” for Labour and predicted that, “sometime after the defeat, Labour members of parliament will probably attempt to replace the Prime Minister in the hope that a new leader can improve the government’s performance before the next general election in 2029”.

They noted that the left-leaning grassroots party members want to elect a candidate to the left of Starmer on economic policy, which “creates a risk of higher business costs and corporate taxation”.

“However, any new Prime Minister will have limited room for manoeuvre. The bond market will force the government to stick by and large to its fiscal consolidation plan.

“The large number of Labour MPs who won their seats from the centre-right Conservative party in 2024 cannot afford a shift to the left in policy that alienates their voters.”