The cost of UK Government borrowing hits 25-year high
The cost of government borrowing hit a 25-year high yesterday as yields on 30-year UK bonds rose amid tensions in the Middle East and mounting concerns about higher oil prices and inflation.
The yield, or interest rate, on the UK’s benchmark 30-year bond or gilt rose as high as 5.16 per cent – its highest level since September 1998 – pushing past a previous peak of 5.115 per cent set earlier this month.
The yield on 10-year bonds rose to 4.69 per cent, close to a 15-year high of 4.755 per cent hit in August.
Yields rise when bond prices fall, indicating the cost of issuing new government debt.
Unlike a year ago, when UK Government bond yields rose much more sharply than those of other countries following the mini-Budget, the latest increase is part of a global trend.
Ten-year US Treasury yields rose above five per cent last week for the first time since July 2007 after remarks by Jerome Powell, chair of the US Federal Reserve, which were seen as confirmation that US interest rates would stay higher for longer to help control inflation.
“Markets remain unsteady and investors undecided, as rising Middle Eastern tensions and bond yields threaten to undermine any thoughts of an immediate rally,” said Richard Hunter, head of markets at the Interactive Investor platform.
The rise came as new figures showed that UK Government borrowing in September was lower than forecast but still remained high. The UK borrowed £14.3bn last month. This was £1.6bn less than a year earlier, but the sixth highest total in September since records began in 1993.
The Chancellor, Jeremy Hunt, said that interest payments on government debt were twice as high last year compared with a year earlier. “This is clearly not sustainable; we need to get debt falling,” he said.
Stock markets fell around the world as they faced another nervous weekend regarding the Israel-Gaza war. The FTSE 100 closed down 1.3 per cent – its biggest one-day fall in over two months.
Global oil prices rose, with the benchmark Brent oil price increasing to $93.17.
