A new British government bond, maturing in 2056, currently offers an annual yield of 5.4 percent in British pounds. This bond is particularly interesting for investors looking to secure high interest rates long-term. However, the attractiveness of the bond also depends on the development of the pound’s exchange rate, as a strengthening of the pound could increase the yield in other currencies such as the euro.
Details about the Bond
- Maturity: The bond matures in 2056, making it a long-term investment opportunity.
- Interest: The bond offers an annual yield of 5.4 percent in British pounds.
- Currency Risk: Since the bond is denominated in pounds, there is a currency risk for investors not investing in pounds. A strengthening pound could increase the yield in other currencies.
Economic Conditions in the UK
The British economy currently shows a mixed picture. On one hand, there is surprisingly strong GDP growth of 0.7 percent in the first quarter of 2025, which is above expectations. On the other hand, high energy prices, geopolitical uncertainties, and a certain nervousness among businesses are weighing on the economy.
Credit Rating of the UK
Despite challenges such as rising inflation and a growing debt, credit rating agencies assess the UK’s creditworthiness as excellent. Fitch Ratings has confirmed the rating at ‘AA-‘ with a stable outlook, while S&P has given ‘AA’ and Moody’s has awarded ‘AA3’ with a stable outlook as well.
Comparison with Other Bonds
British government bonds currently offer higher yields than many other European bonds, such as federal bonds. This makes them attractive to investors looking for higher returns. However, there are also other British bonds with different maturities and interest rates that can go up to 11.9352 percent.
Auctions and New Issues
The British Debt Management Office (DMO) regularly plans auctions for Treasury Gilts to manage public debt. Such an auction is scheduled for June 11, 2025, during which gilts with a yield of 4.5 percent and a maturity in 2035 will be auctioned.