On 23 September 2025 we marked the third anniversary of the Truss/Kwarteng mini-Budget, an extraordinary and calamitous episode which ultimately claimed the jobs of both the chancellor and the prime minister, and set the scene for a Labour victory in the 2024 general election. The mini-budget sparked a sharp sell-off in the UK gilt market, which led to a Bank of England bail out and a wholesale government policy U-turn. 

The gilt market is important because it sets the rate for government borrowing, which affects the taxes we pay. It also determines what rate UK companies can borrow at, and how mortgages are priced. Lots of people will also have exposure to the gilt market through their pensions. So, it’s highly influential. And now, three years on from the mini-budget, long-dated UK gilt yields are now actually higher than in September 2022. So should we be worried?

NO ROOM FOR COMPLACENCY

There’s never room for complacency, but there are a number of reasons why the level of concern about UK gilt yields isn’t the same as in the wake of the mini-Budget. Probably the biggest component in the gilt crisis of September 2022 compared to the situation today is the speed with which yields rose. Between 22 and 27 September 2022, the 30-year gilt yield rose by 1.2% in three trading days. By comparison the 30-year gilt yield has risen by 1.2% over the course of a year to reach its recent high of 5.7% (as at 2 September 2025). This has allowed investors to absorb and adjust to the rise in yields, which are also offset by income payments from the bonds.

The global picture is also different. Long-term bond yields are today higher not just in the UK, but in the US and Europe too. At the height of the UK gilt crisis in the wake of the mini-Budget, the 30-year UK gilt was trading at 1.2% above the 30-year US bond and 2.9% against the 30-year German bond. Long-term gilts are still trading at a premium to those international comparators, but a significantly lower one, to the tune of 0.8% higher than the US and 2.2% higher than German government bonds. 

MORTGAGES ARE LESS AFFECTED

Mortgages aren’t so badly affected by the current fluctuations in the gilt market either, because the recent sell-off looks to be centred around the long end of the market, while in 2022 it was all across the curve. This is significant particularly in the two-year and five-year gilt market, which reflect short term interest rate expectations that feed through into mortgage pricing. These are currently lower than during the mini-budget crisis and more stable. 

The two-year gilt yield currently stands at 4%, down from 4.4% at the beginning of this year. This compares to the two-year gilt yield rising from 3.5% on 22 September 2022 to 4.7% on 27 September 2022. We all know what then happened to mortgages.

Inflation expectations also play their part. While inflation is now above target and uncomfortably high, it’s nowhere near the levels it was in 2022. At the time of the mini-Budget, the latest published inflation data for August 2022 showed CPI at 9.9%. Inflationary fears were high. A survey of market participants conducted by the Bank of England in early September 2022 shows than on average they expected inflation to hit 13.3% in 2023. 

Inflation is the nemesis of conventional bonds because it erodes the real value of their fixed income streams and the final capital repayment. It also spells interest rate rises from the central bank, which make bonds less attractive, forcing yields upwards. In such an environment, the fiscal stimulus injected by the mini-Budget pushed hard against the Bank of England’s attempts to curb inflation and led to the market fearing even higher interest rates would be needed, with knock on consequences for bond prices. The current inflationary outlook, and the approach of the chancellor, are less of a threat to the gilt market.

CONVENTIONAL PROCESS RESTORED

Lastly, some conventional process has returned to fiscal policy. Orthodoxy might be a dirty word for Truss and her supporters when it comes to economics, but if you’re asking to borrow bucketloads or money, it turns out potential lenders like to stick to some established rules. Truss and Kwarteng announced £45 billion of unfunded tax cuts in the mini-Budget without any scrutiny or projections from the OBR, on top of an uncosted energy package which, at the time, the IFS reckoned could have cost £100 billion in its first year. 

Government borrowing is by no means in a great place now, but one thing we know about Rachel Reeves is she will live or die by her fiscal rules. We got a glimpse of how important that in July, when the gilt market got a case of the jitters as the chancellor shed tears in parliament and it looked like she might be replaced. Balancing the books is important to the bond market, and the less credible, or indeed visible, the maths provided by the government, the higher the price it will pay to borrow. The forthcoming budget isn’t going to be a bed of roses by any stretch of the imagination, but a repeat of the 2022 gilt crisis thankfully looks like a distant prospect.

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