Bond Yields Explained

  • UK bond yields are the rate of interest received by those holding Government bonds.
  • Governments sell bonds (also called gilts) via the Debt Management Office to fund their budget deficits. Bonds are a way for the government to borrow – a bit like the government taking out a loan.
  • Government bonds are frequently traded on bond markets. Therefore, their market price may be quite different to the original price set by the government.

Example of why bond yield changes

A government may sell a 10-year, £1,000 bond at 5% interest. This means every year the government will pay £50 to the holder of this bond.

  • If demand for government bonds rose, this £1,000 bond would increase in price as investors pushed up the market price.
  • But, the government still pay £50 a year interest until maturity. If the market price of the bond rises to say £2,000, the interest rate (yield) is now 2.5% (50/2,000)
  • Therefore higher demand for bonds leads to lower bond yields.
  • Conversely, if people sell bonds, this pushes up the bond yield (e.g. what happened in UK September 2022)

How a change in price of a bond changes the effective yield


The law of the bond market


  • As bond value rises, interest yield falls
  • As bond value falls, interest yield rises

Video summary

The Bond Market Explained - Why the Bond Market can force government's to do U-Turns

Recent UK Bond Yields


Source: Bank of England – 10-year bond yields

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UK Unemployment Stats and Graphs


A selection of graphs and statistics on UK unemployment. Also, looking at factors that explain changes in UK unemployment. Why unemployment was lower in 2000s and 2010s, and how Covid-19 will cause a sharp spike in unemployment.   Raw data:  Labour market data | Source: ONS MGSX (LFS) Current UK Unemployment rate An unemployment rate …

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Employment Rates – Population ratio

A look at some varying employment rates across OECD countries.


Source: OECD short term Labour Market stats

Employment rates are determined by the number of people of working age, who have a job.

The employment rate excludes:

  • People who are unemployed. – actively seeking work and willing to take work
  • People who are students
  • People who take early retirement.
  • People on disability or sickness benefits.
  • Parents staying at home to look after their kids.

Implications of Employment Rates

  • A fall in the employment rate to less than 70% is an indicator that the economy is working well below full capacity.
  • The government will be losing out on employment tax revenue
  • The government will be paying more on welfare benefits to support those out of employment.


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