Bank of England Governor Andrew Bailey said on Thursday that public debt in advanced economies has expanded due to weak productivity and the COVID-19 pandemic, pushing up borrowing costs. At a meeting hosted by the London School of Economics, he noted that an aging population and plans to increase defense spending are also important factors. He also pointed to a correlation with why French government bond yields are higher than those of L'Oreal, noting that bond yields have risen sharply in recent months, with the 10-year UK gilt yield reaching its highest level in about two decades. Furthermore, he stated that Federal Reserve Chair Kevin Warsh is right to see dangers in forward guidance, and that central banks should avoid unconditional guidance.
Bailey's remarks on public debt expansion and higher borrowing costs support elevated gilt yields.
