When the bond market calls the tune for stocks, it’s time for investors to proceed with caution. The 10-year Treasury yield, always closely watched, has now arguably become the most important metric for stock investors.

Yields on U.K. government debt rose to their highest levels for over 25 years and the British pound continued to sag against the dollar, as investors worry about increasing levels of government borrowing and a generally lackluster economy.

More important is the actual hit to the government debt bill. Two-fifths of the rise in government spending since the pandemic is down to higher debt interest. If yields stay high the squeeze will get more painful still. That will mean tax increases or spending cuts down the line.

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UK gilt yields hit multi-decade highs, with 10-year yields at 4.90% and 30-year at 5.40%. The pound slumped to a 14-month low. Analysts debate if this is a new "Truss moment" or temporary turbulence driven by inflation and fiscal worries.