Sterling shorting activity jumps 150% on IG platform amid gilt market turmoil

Traders worldwide have sharply increased bearish bets against sterling, with short positions on the IG platform surging by more than 150% amid escalating turmoil in UK bond markets.

The sell-off in gilts has pushed UK government borrowing costs to their highest levels in almost three decades, as doubts intensify over the government’s ability to manage its growing debt pile.

Among IG’s international clients, the volume of short trades against the pound rose 153% on Tuesday versus the previous day, with the value of those positions climbing by a similar 150%. UK-based traders also piled in, with short bets jumping 116% day-on-day and up 137% compared with the previous Tuesday.

The pressure stems from a sharp rise in the 30-year gilt yield – a key benchmark for long-term UK borrowing costs – which touched 5.69% on Tuesday, its highest level since 1997. Analysts see the spike as a clear signal of waning confidence in the UK’s fiscal credibility, with some warning that bond markets are beginning to deliver a verdict on the government’s economic management.

Chris Beauchamp, Chief Market Analyst at IG, said: “The turmoil in gilts and sterling has put the UK government’s fiscal position squarely back on everyone’s radar. The mood around the UK economic outlook continues to sour as 30-year gilt yields hit their highest level in more than a quarter of a century. UK stocks might still be cheap, but investors are concerned that this attractive valuation comes with the risk of a broader fiscal crisis. There is still time for the government to get its house in order, and the panic hasn’t spread to the 10-year yield yet, but the clock is ticking.”

Early trading today suggests the selloff is not over, with 30-year yields edging above Tuesday’s peak.

Beauchamp added: “While the 10-year yield remains elevated but less volatile, bond markets are clearly sending a warning shot to Westminster. Without credible plans to restore confidence – likely through a combination of spending cuts and tax rises – the UK risks deeper financial instability.”

Sterling has already fallen around 1% against the US dollar this week, as concerns mount over the widening budget deficit and the mounting cost of servicing Britain’s debt.