With the 30-year gilt yield reaching 5.73 per cent, it raises the chances that the government will need a mix of further tax rises and possible spending cuts. Sterling declined by more than 1 per cent on Tuesday to $1.33 against the dollar; it also weakened against the euro.

A recurring theme of commentary is that the UK is stuck in a "doom loop" of flatlining economic growth, weak revenues, demand for more tax hikes, and weaker growth as a result. Already, critics say Reeves' clampdown on the UK's resident non-domicile system, for example, has shrunk the tax base instead of expanding it. 

While wealth managers appear to be concerned, there were efforts to set the rise of gilt yields into a wider context – other countries such as France also have their fiscal woes.

Matthew Amis, investment director, rates management at UK investment manager , sees it as an opportunity. “Gilt yields at their highest since the 1990s? Let’s put that another way – they haven’t offered greater return potential in nearly 30 years,” Roberts said. “The widely reported selloff has been orderly. So orderly in fact that total returns year-to-date are actually still slightly positive. You can afford a chunk of capital loss from an asset when you are being paid nearly 6 per cent a year to own it. Feel free to panic out, I'm happy to add a small amount of such cheap assets to help diversify my global bond fund.''

Other reactions

Chris Beauchamp, chief market analyst at IG 
"The ructions in the gilt market have continued, as early trading takes the 30-year yield up above yesterday's high. Notably however the 10-year yield, while at the highs of the year, has not seen quite the same panicky reaction as its longer-dated cousin. Bond investors do seem to be sending a message to the UK government, one that Westminster has been aware of for some time. Only when the 10-year shoots higher should we really start to worry, and for now the government has the breathing space to take another hard look at the public finances – a combination of taxation and spending cuts remains the only way to retain credibility."

Oliver Faizallah, head of fixed income research at Charles Stanley
"The UK has seen longer-dated bonds selloff a little more than other developed market countries because we've seen a large drop in the longer-dated bond buyer base. Historically, defined benefit pension funds were a massive buyer of long end gilts, but as we have seen a shift to defined contribution schemes, demand has dropped. This is a technical issue that has exacerbated concerns around UK inflation and interest rates, combined with global issues. Some of this selloff therefore could be quelled if we see a reduction in bond selling at the long end (quantitative tightening) by the Bank of England, and a shift of debt issuance from the long end to the short end by the DMO/UK Treasury. In addition, any hint of cutting spending, tax increases and continued commitment to the fiscal rules at the Budget, will also see some of this selloff reverse. As it stands, the market is in wait-and-see mode. Buyers of longer-end gilts are price sensitive (not central banks or liability-matching DB pension funds), and yields could continue to drift higher before we see a resolution."

Rob Morgan, chief investment analyst at Charles Stanley
"Bond market trends are adding to the pressure on government finances. Escalating global inflation concerns and fewer price-insensitive buyers such as pension funds have helped push up yields on UK government bonds, adding to the question marks around the UK’s fiscal credibility. The widely-followed 30-year gilt yield, the benchmark for long-term government borrowing costs, recently approached its highest levels in three decades, topping 5.5 per cent. 

"At this sort of level any misstep such as a clumsy handling of previously “iron clad” fiscal rules could be severely punished by markets, risking a ‘doom loop’ of ever-higher borrowing costs, greater economic pain, and lower tax revenue. The Chancellor needs to keep bond markets onside as a matter of priority as waning investor confidence from this point could be hugely damaging."

Emma Moriarty, portfolio manager, CG Asset Management 
“Gilt yields are an expression of bond markets’ confidence in the UK government. This confidence is always a function of the sustainability of fiscal policy and the outlook for growth in the UK economy. Of course, international factors – the weakened global growth outlook caused by US trade policy – are a contributor. But the reality is that the government came out of the last budget round with wafer thin fiscal headroom. The very public U-turn on proposed cuts to welfare spending showed that, despite the deteriorating fiscal situation, there is still no effective majority for cutting expenditure. Since then, all proposals to shore up the fiscal position have been centred on raising taxes in a way which won’t hit “working people.” There is a real fear that these proposals – for example, a wealth tax – disincentivise economic activity for uncertain impact on revenues.

“International factors have definitely contributed. Gilts have to compete in the market of other developed market government bonds, and when all of the UK’s closest competitors – the US and Europe – are also facing intractable fiscal issues, market participants fear increasing supply in an environment where the traditional price insensitive buyers (central bank QE, pension funds) may not be able to respond to the same extent. Ultimately, price will be the adjustment mechanism.  

“One striking feature of the Debt Management Office’s more recent announcements is the shift away from issuing long-dated gilts. The DMO is mandated to issue debt in a way which minimises financing costs and, more recently, their issuance has shifted away from longer-dated gilts towards shorter maturities. While this makes sense from a more immediate cost perspective, it will at least in part reflect the disappearance of traditional price insensitive buyers, it is also a very concrete and public acknowledgement of bond markets’ deteriorating confidence in the outlook for the UK.”