Global bond sell-off piles new pressure on UK borrowing costs before budget
Summary
Global selling of government bonds has caused UK borrowing costs to rise, increasing the interest rates on UK government debt just before the next budget. High oil prices and inflation fears are also pushing bond yields higher in the UK and the US.Key Facts
- The interest rate on 10-year UK government bonds rose to 5.38%, near a 19-year high.
- Higher interest rates increase government borrowing costs and affect budget forecasts.
- Since March, over half of the UK government’s £24 billion fiscal buffer has been lost due to rising bond yields.
- UK Chancellor John Healey aims to meet fiscal rules but likely with a smaller safety buffer.
- Rising energy prices, linked to the Middle East conflict, increase inflation risks and pressure the Bank of England to raise interest rates.
- The Bank of England expects household energy bills to rise by 24% in January if oil prices stay high.
- US 30-year Treasury bond yields hit their highest level since 2004 at 5.444%.
- Investor concerns include inflation, high US government spending, and more bond sales by AI companies reducing demand for government debt.
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