Lending the UK government a few quid hasn’t been this lucrative for decades

Buying bonds is usually seen as a safe, boring bet; somewhere to securely stick cash that isn’t earmarked for a more exciting or higher-risk investment — and buying government bonds is especially so. Returns for buying German bonds, for example, hovered near zero percent for the best part of a decade.

But investors lending money to the UK government for 30 years can now earn as much as 5.35% a year — a record-high yield not seen since 1998— while the yield for buying a 10-year gilt (what the UK calls its government bonds) has also hit its highest level since 2008 this morning.

While soaring yields may seem like a win for investors, they’re rather a warning sign, as sovereign yields offer some signal on investors’ confidence in that country’s economy. In France, for example, recent budget turmoil pushed yields higher than those of corporate giants like LVMH and L’Oréal, which, though an imperfect comparison, made lending to the French government look riskier than backing its luxury handbags and cosmetics makers.

See the full article here.