The financial markets are nervous. Investors are demanding a higher yield for holding UK government bonds (‘gilts’) and the pound has continued to slide against the US dollar. It is still too soon to talk of a ‘sterling crisis’. Nonetheless, the heightened political uncertainty and large current account deficit could make UK assets particularly vulnerable to any loss of confidence.
Fortunately, the risks here are smaller than many seem to think. It is important first to put the recent market jitters in perspective.
Over the last month the yields on 10-year gilts have jumped by about one percentage point. But the yields on German bonds have also risen sharply, by around three-quarters of a point. This difference is small and can largely be explained by the fact that investors are even more worried about the prospects for the German economy. UK yields also remain lower than those in the US…
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Utopia, you are standing in it! 
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