The cost of UK state borrowing is close to a 15-year high – levels seen only twice since the global financial crash. The amount the UK government has to pay – the yield – to borrow money for 10 years via its benchmark 10-year bonds – known as gilts – rose to more than 4.7% on Thursday. Only twice since the 2008 crash has such a high been reached, both times in August this year.
On one of those occasions, the yield topped 4.75%. It stood at 4.69% on Friday while yields on 30-year bonds later hit their highest level since 1998, as part of a broader global move over concerns about sticky inflation and rising tensions in the Middle East. Bonds are a key way that countries access money to fund expenditure and act as an IOU.
As the cost of bonds fall, perhaps as investors sell off bonds, the rate that states have to pay to borrow the sums increases. High yields mean borrowing becomes more expensive, complicating the picture for governments hoping to increase spending, investment or perhaps bring in tax cuts.