Global Bond Sell-off Intensifies as UK Long-Term Borrowing Costs Pass 6%
Government borrowing | The Guardian
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In the world of global finance, a significant shift is taking place:
Global bond sell-off intensifies, as UK long-term borrowing costs pass 6%
This marked increase in borrowing costs, specifically for UK 30-year bonds, is a testament to rising fears about the US deficit's unsustainability. The yield hit a 28-year high, last seen in 1998, fueled by concerns over persistent high oil costs and potential central bank interest rate hikes.
Specifics:
- UK 30-year bond yield: 6%, a 28-year high
- Impact: Increased government borrowing costs and pressure on Chancellor John Healey ahead of the budget
- Stock Market Reaction: 1.7% drop in the FTSE 100 in London, similar declines in European bourses
“There is carnage in the bond market which is hitting stocks hard,” noted Neil Wilson, Saxo UK's investor strategist.
However, by midday, the sell-off had abated, with the 30-year bond yield falling below 6% and stock prices recovering.
Underlying Factors:
- Global Inflation Concerns: The Middle East conflict continues to limit oil supplies, driving up inflation.
- US Bond Movement: US 10-year Treasury yields hit their highest level since 2002, with Japan's 10-year yield approaching its recent peak.
- Inflation Data: Despite lower-than-expected US inflation figures, investor fears persist due to expected further interest rate increases.