The cost of UK government borrowing has hit levels not seen since the global financial crash of 2008. The yield on 10-year gilts, the UK’s benchmark government bond, rose to more than 4.7%, the highest level since August this year. .
Rising yields mean the UK government will have to pay more to borrow money, making it harder to fund public spending and potentially complicating the government’s plans for tax cuts and higher spending investment
The rise in yields has been driven by a number of factors, including concerns about high levels of UK public debt and the Bank of England’s decision to raise interest rates to fight inflation.
The Resolution Foundation think tank has forecast that UK government debt as a proportion of GDP will reach 140% over the next 50 years if current market expectations about interest rates are correct. This would represent a significant increase from the current level of around 85% of GDP.
The rise in yields has also been driven by concerns over US government debt and the Federal Reserve’s decision to raise interest rates. The yield on 10-year US Treasuries hit 5% earlier this week, the highest level since 2006.
Rising yields have been a global phenomenon, with government bond yields rising in many countries. This has been driven by a number of factors, including concerns about the global economy, the war in Ukraine and the ongoing COVID-19 pandemic.
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