The value of the pound slid to its lowest level for nine months after government borrowing costs surged further. It comes during a continued sell-off in the bond market amid investor concerns over the threat of stagflation and a fresh barrage of bond sales.
Sterling dropped by as much as 1.1% to 1.233 against the dollar, striking its lowest level since April last year. The yield on the benchmark 10-year UK gilt, which reflects the cost of government borrowing, climbed by roughly 12 basis points to a peak of 4.81%.
It marked the highest reading since the 2008 financial crisis. The rise in gilt yields has an inverse effect on the price of these government bonds, which fell as a result on Wednesday. The cost of longer-term borrowing also continued to rise, with the yield of 30-year gilts striking their highest level since 1998.
These were up around 10 basis points to a peak of 5.36% as a result. Globally, there has been a wider sell-off in government bonds in recent months in the face of worries that US President-elect Donald Trump could introduce a tariff policy which would be inflationary for many international economies.
US Treasury yields also moved firmly higher on Wednesday, with the 10-year Treasury yield lifting to 4.69% – its highest since April last year. It came after reports of resilience in the US economy, casting doubts over expectations for further cuts to interest rates.
