\n<\/p>\n
Britain\u2019s long-term borrowing costs have hit their highest level in 27 years, intensifying the pressure on the chancellor, Rachel Reeves, before the autumn budget.<\/p>\n
The yield, or interest rate, on 30-year UK government debt hit 5.723% on Tuesday. That is its highest level since 1998, indicating that it will cost the UK more to borrow from the markets, above the previous 27-year high of 5.649% set in April.<\/p>\n
Yields, which rise when a bond\u2019s price falls, are a measure of the interest rate that investors demand when lending to a government or company.<\/p>\n
The UK 30-year bond yield has been rising steadily over the last year, amid a wider global sell-off in long-term government bonds, which gathered pace on Tuesday. Analysts have blamed that sell-off on rising inflationary expectations \u2013 meaning lenders seek a higher rate of return.<\/p>\n
The pound also weakened on Tuesday, falling by 1.8 cents against the US dollar to $1.3365, its worst day since early April, when Donald Trump launched his global trade war.<\/p>\n
Bond yield chart<\/p>\n
Economists are also concerned that Reeves may announce tax rises in the autumn budget; the City consultancy Capital Economics has predicted the chancellor may have to raise \u00a318-28bn in the autumn budget, mostly via higher taxes, to meet her fiscal rule with a buffer of \u00a39.9bn.<\/p>\n
Rising borrowing costs are a blow to the UK chancellor, as they eat into the limited fiscal headroom available to the Treasury. This may force Reeves to consider tax rises, or spending cuts, to ensure she still hits her fiscal rule to have debt falling in five years\u2019 time.<\/p>\n
In the UK, opposition to proposed welfare cuts has highlighted the challenge in cutting government spending.<\/p>\n
\u201cGilt yields have risen again in recent days, reflecting concerns that further tax increases from already high levels could damage growth, add to inflation, and still leave a sizeable hole in the public finances. Markets appear less focused on Treasury rhetoric and more on whether the government can present a credible plan to control spending,\u201d said Mark Dowding, the BlueBay chief investment officer at RBC BlueBay Asset Management.<\/p>\n
\u201c<\/em>The central issue is the perception that welfare expenditure remains on an unsustainable path. Without action in this area, confidence risks eroding further.\u201d<\/p>\n \u201cWhile rumours around tax policy add to the noise, the underlying challenge is structural and relates to whether the UK can avoid slipping into a worsening fiscal position,\u201d Dowding added.<\/p>\n The rise in borrowing costs came as the City digested Keir Starmer\u2019s decision to reshuffle his Downing Street organisation on Monday, including putting Darren Jones, the chief secretary to the Treasury, in charge of day-to-day delivery of the prime minister\u2019s priorities.<\/p>\n skip past newsletter promotion<\/p>\n Sign up to Business Today<\/span><\/p>\n Get set for the working day \u2013 we’ll point you to all the business news and analysis you need every morning<\/p>\n Privacy Notice: <\/strong>Newsletters may contain information about charities, online ads, and content funded by outside parties. If you do not have an account, we will create a guest account for you on theguardian.com to send you this newsletter. You can complete full registration at any time. For more information about how we use your data see our Privacy Policy. We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply.<\/span><\/p>\n after newsletter promotion<\/p>\n Concern that the chancellor is being \u201cmanaged out\u201d is weighing on UK government bonds, suggested Kathleen Brooks, the research director at XTB.<\/p>\n \u201cThe last time there was a threat to Reeves\u2019s position, back in early July, bond yields jumped as the market worried that she could be replaced by a more left-leaning member of the Labour party,\u201d Brooks said.<\/p>\n \u201cIf UK yields continue to rise, and if they start to rise at a faster rate than elsewhere, then it could be a sign the market is pricing in a growing probability that Rachel Reeves will throw away her fiscal rules and borrow more at the budget to fund spending, rather than increase taxes and stymie growth,\u201d Brooks added.<\/p>\n A recent flurry of reports about potential budget tax rises have worried bond investors, according to Marcus Jennings, the fixed income strategist for global unconstrained fixed income at Schroders.<\/p>\n \u201cBroadly speaking, whilst no specific policy has caused a sell-off in government bonds in isolation, the rush of potential policies is a reminder of how challenged the UK\u2019s fiscal position is. This has likely facilitated a move higher in yields in the UK, notwithstanding the global move in long-end yields,\u201d Jennings said.<\/p>\n Potential measures reported in recent weeks include a new tax on the sale of homes worth more than \u00a3500,000, or possibly applying national insurance to the rental income received by landlords.<\/p>\n While bond prices fell on Tuesday, traders piled in to precious metals in a flight to safety. This pushed the gold price up to a new record high of $3,508 (\u00a32,607) an ounce on Tuesday, while silver rose over $40 an ounce for the first time since 2011.<\/p>\n Anxiety over fiscal sustainability is another factor hitting the bond market, with Donald Trump\u2019s recent tax cuts and spending bill expected to add trillions of dollars to the US national debt.<\/p>\n Stocks fell in the UK and across Europe. London\u2019s FTSE 100 share index was down 0.8%, with domestically focused stocks such as Marks & Spencer (-4%), Land Securities (-4%) and Howden Joinery (-3%) among the fallers.<\/p>\n There were larger drops in other European markets, with Germany\u2019s Dax down by 2.2%, Spain\u2019s Ibex losing 1.5% and Italy\u2019s FTSE MIB dipping by 1.5%.<\/p>\n Eurozone government bonds also weakened, with France\u2019s 30-year government bond yields hitting their highest levels in more than 16 years on Tuesday, driven by fiscal concerns.<\/p>\n French bonds are under pressure as the prime minister, Fran\u00e7ois Bayrou, holds talks with political parties in an attempt to prevent a government collapse before next week\u2019s confidence vote.<\/p>\n France\u2019s 30-year government bond yield hit its highest since June 2009 at 4.513%, up 6.5 basis points.<\/p>\n","protected":false},"excerpt":{"rendered":" Britain\u2019s long-term borrowing costs have hit their highest level in 27 years, intensifying the pressure on the chancellor, Rachel Reeves, before the autumn budget. The yield, or interest rate, on 30-year UK government debt hit 5.723% on Tuesday. That is its highest level since 1998, indicating that it will cost the UK more to borrow<\/p>\n","protected":false},"author":1,"featured_media":18757,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48],"tags":[11474,5171,305,844,558,949,70,4785,2656,345],"class_list":{"0":"post-18756","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-politics","8":"tag-27year","9":"tag-borrowing","10":"tag-costs","11":"tag-economics","12":"tag-government","13":"tag-high","14":"tag-hit","15":"tag-pressure","16":"tag-reeves","17":"tag-rises"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/18756","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=18756"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/18756\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/18757"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=18756"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=18756"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=18756"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}