Why are investors wary of UK gilts despite their current yields?

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Investors are wary of UK gilts because political instability and stretched public finances have raised concerns about borrowing costs and volatility.
Investors are wary of UK gilts even with yields around 4.85 per cent because repeated political crises and worries about Britain’s stretched finances have pushed confidence down. Gilts are also described as prone to far higher volatility than many other government bonds, and the market is close to levels not seen since the 2008 financial crisis.
UK gilt yields are high, but the concern is about what drives them
UK gilt yields are around 4.85 per cent, which is not far from their highest level since the 2008 financial crisis. The higher yield level matters because Britain must pay more for its medium-term borrowing needs than any other developed nation.
Repeated political crises have shaken investor confidence
The risk profile for gilts has been worsened by repeated political crises, which have made investors cautious. Investors appear to be reacting to uncertainty around fiscal direction and decision-making in the UK.
Stretched finances and high debt servicing costs weigh on sentiment
Britain’s borrowing costs are linked to high debt and interest payments, alongside years of weak economic growth. The difficulty of cutting spending and the need to invest in areas like defence are also part of the backdrop that leaves finances “stretched,” reinforcing investor caution about gilts.
Investors expect volatility, not just a yield level
In addition to the yield level, investors are focused on how gilts trade under stress, given that they are described as prone to much higher volatility than many other government bonds. Traders also show willingness to pay more to hedge pound volatility in the coming weeks, reflecting concern that conditions could remain unstable.

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Why are investors wary of UK gilts despite their current yields?

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