UK borrowing costs soar, gilt yields hit 6% for first time since 1998

(Alliance News) - A global bond sell-off has seen UK gilt yields hit 6% for the first time in nearly 30 years, heaping pressure on the chancellor ahead of his inaugural budget later this month.

The yield on UK government bonds, also known as gilts, reached 6.07% in morning trading on Thursday – the highest level since 1998, with the worldwide bond market woes spilling over into equities as London's FTSE 100 Index tumbled by 1.7%.

Gilt yields move counter to the value of the bonds, meaning their prices fall when yields rise.

Rising yields on these bonds mean it costs more for governments to borrow from financial markets.

It intensifies the challenge facing Chancellor John Healey as he looks to set out his first budget at a time of pressure on Britain's creaking public finances and rising debt pile.

Axel Rudolph, chief technical analyst at IG, said: "Higher yields mean the government has to pay more to finance its debt, putting further pressure on the public finances and making it harder to balance spending commitments with the need to keep borrowing under control.

"Even the recent fall in oil prices hasn't provided any lasting relief for bond markets.

"With yields still rising, the chancellor faces an increasingly narrow path as he prepares to set out his plans for the economy."

By Holly Williams, Press Association Business Editor

Press Association: Finance

source: PA

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