UK long-term borrowing costs reach 28-year high
Summary
The cost for the UK government to borrow money for a long time has reached its highest level since 1998. This rise is linked to the ongoing conflict between the US, Israel, and Iran, as well as political uncertainty before upcoming local and national elections in the UK.Key Facts
- UK government bond yields for 30 years hit a 28-year high; 10-year bond yields reached an 18-year high.
- The Iran war caused the closure of the Strait of Hormuz, affecting oil and natural gas supplies and raising energy prices worldwide.
- Higher inflation expectations and borrowing costs have pushed bond markets down globally.
- UK markets were more affected than other major economies, due to inflation concerns and political instability around UK elections.
- Rising bond yields mean the UK government will have to pay more interest on its debt.
- Chancellor Rachel Reeves aims to avoid borrowing for daily spending and wants to reduce the government’s debt compared to national income.
- UK government borrowing was £132 billion for the year to March, the lowest in three years, but may increase if inflation rises.
- The Bank of England’s governor, Andrew Bailey, said currency value shows UK markets are not unusually weak despite the situation.
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