Government bond markets have been in focus this week, as a number of long-dated yields hit multi-decade highs — which, one fund manager says, presents a “generational opportunity” in the U.Ok.’s gilts. The U.Ok. 30-year yield hit 5.723% on Tuesday, its highest stage since 1998, because the yield for the 10-year was at its most elevated for the reason that begin of this yr, at 4.835%. The 2-year gilt yield has in the meantime eased from 4.379% in January to round 3.95%. “The term premium, so the yield you’re getting on the long end of the curve versus the short end, is exceptionally high, particularly in the U.K., and that means a lot of bad news is priced in,” James Carter, fund manager at W1M, informed CNBC’s “Europe Early Edition” on Wednesday. Gilts have suffered extreme spells of volatility in previous years on each ends, from the 2022 mini-budget disaster beneath former Prime Minister Liz Truss , to the sharp spike in July , as questions swirled round Finance Minister Rachel Reeves’ future. A latest discount in demand from British pension funds , that are paring again 30-year gilt holdings as they attain maturity, is including to that choppiness. Gilt market volatility is “likely to remain high while sentiment is so low as it is today,” Carter mentioned. “We need to try and look through that and look at the value opportunity on offer across government bonds, but particularly in markets such as the U.K. … and that is a screaming buy.” Carter famous the results of gilt auctions — which confirmed demand at a ratio of about three and a half that of issuance — painted a really totally different image to a few of the public dialogue of the U.Ok. being in a disaster akin to that of the Seventies. At that point, the British pound collapsed and the nation was compelled to hunt a mortgage from the International Monetary Fund . Bond vigilantes have made clear that they will not tolerate the identical type of fiscal largesse from the U.Ok. that they may in economies such because the U.S. But the federal government has addressed this by repeatedly emphasising its fiscal guidelines , Carter mentioned. “As soon as the bond market starts to believe that, and probably the autumn budget is another chance for them to send that message — that we are a safe pair of hands in a world where everyone else is pressing on that fiscal tap more and more — that could offer a bid for gilts,” he informed CNBC. That could be compounded by a Bank of England choice to sluggish quantitative tightening, because it “doesn’t make any sense selling gilts when they’re down 50% from their highs in 2020,” Carter added. If the federal government “can continue to push the narrative that it’s not as bad as it seems … I believe there is a generational opportunity for investors to be buying government bonds at yields in real terms that are 2.5 to 3%.” Carter additionally burdened that he didn’t see the identical alternatives elsewhere. Japan is unappealing from an actual yield perspective , whereas the U.S. is in a dark fiscal scenario and has an unremarkable long-term threat time period premium which may very well be pushed up greater by U.S. President Donald Trump’s assaults on Federal Reserve independence and inflationary considerations, he argued. In the euro zone, he mentioned Germany’s upcoming protection and infrastructure spending push would put strain on bond yields. France in the meantime faces an incapability to push by means of finances laws and a public unwilling to simply accept the spending cuts or tax will increase wanted to alter its financial fundamentals. In a Tuesday word, UBS strategists Giles Gale and Reinout De Bock referred to as the U.Ok. “one of the most interesting rates markets for the 2025 run-in.” “The long end is cheap. It could also be risky — the budget could be an idiosyncratic risk and demand can be thin,” they mentioned. “We think it is likely that the lack of headroom in the U.K.’s finances will prompt the need for additional taxation. It is clear to all that the market currently prices them to be either insufficient, not credible, or inflationary. The risk is that any hole will be plugged, and any fiscal drag is bullish rates.”