{"id":108888,"date":"2025-09-02T10:31:07","date_gmt":"2025-09-02T10:31:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/108888\/"},"modified":"2025-09-02T10:31:07","modified_gmt":"2025-09-02T10:31:07","slug":"pressure-rises-on-reeves-as-government-borrowing-costs-hit-27-year-high-economics","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/108888\/","title":{"rendered":"Pressure rises on Reeves as government borrowing costs hit 27-year high | Economics"},"content":{"rendered":"

Britain\u2019s long-term borrowing costs have hit their highest level in 27 years, intensifying the pressure on chancellor Rachel Reeves<\/a> before the autumn budget.<\/p>\n

The yield, or interest rate, on 30-year UK government debt hit 5.680% on Tuesday morning. That is its highest level since 1998, indicating that it will cost the UK more to borrow from the markets, above the previous 27-year high of 5.649% set in April.<\/p>\n

Yields, which rise when a bond\u2019s price falls, are a measure of the interest rate which investors demand when lending to a government or company.<\/p>\n

The UK 30-year bond yield has been rising steadily over the last year, amid a wider global sell-off in long-term government bonds. Analysts have blamed that sell-off on rising inflationary expectations \u2013 meaning lenders seek a higher rate of return.<\/p>\n

Bond yield chart<\/a><\/p>\n

While bond prices fell on Tuesday, traders piled in to precious metals in a flight to safety. This pushed the gold price up to a new record high of $3,508 (\u00a32,607) an ounce on Tuesday, while silver rose over $40 an ounce for the first time since 2011.<\/p>\n

Anxiety over fiscal sustainability are another factor, with Donald Trump\u2019s recent tax cuts and spending bill<\/a> expected to add trillions of dollars to the US national debt.<\/p>\n

In the UK, opposition to proposed welfare cuts<\/a> have highlighted the challenge in cutting government spending.<\/p>\n

Rising borrowing costs are a blow to the UK chancellor, as they eat into the limited fiscal headroom available to the Treasury. It may force Reeves to consider tax rises, or spending cuts, to ensure she still hits her fiscal rule to have debt falling in five years\u2019 time.<\/p>\n

The rise in borrowing costs came as the City digested Keir Starmer\u2019s decision to reshuffle his Downing Street organisation<\/a> on Monday, including putting Darren Jones, the chief secretary to the Treasury, in charge of day-to-day delivery of the prime minister\u2019s priorities.<\/p>\n

\u201cThe immediate market reaction is not exactly a vote of confidence on these moves,\u201d said Simon French, the chief economist and head of research at the investment bank Panmure Liberum.<\/p>\n

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\u201cMarkets [are] seeing it as a signal of more gilt issuance\/inflation to come,\u201d French said.<\/p>\n

Rob Morgan, the chief investment analyst at Charles Stanley, said: \u201cBond market trends are adding to the pressure on government finances. Escalating global inflation concerns and fewer price insensitive buyers such as pension funds have helped pushed up yields on UK government bonds, adding to the question marks around the UK\u2019s fiscal credibility.<\/p>\n

\u201cAt this sort of level any misstep such as a clumsy handling of previously \u2018iron clad\u2019\u201d fiscal rules could be severely punished by markets, risking a \u2018doom loop\u2019 of ever higher borrowing costs, greater economic pain, and lower tax revenue. The chancellor needs to keep bond markets onside as a matter of priority as waning investor confidence from this point could be hugely damaging.\u201d<\/p>\n

The pound also weakened on Tuesday morning, falling by 1.5 cents against the US dollar to $1.34.<\/p>\n

Stocks fell in the UK and across Europe. London\u2019s FTSE 100 share index lost 0.4%, with domestically focused stocks such as Marks & Spencer (-3.3%), BT Group (-3%) and J Sainsbury (-2.2%) were among the fallers.<\/p>\n

There were larger drops in other European markets, with Germany\u2019s Dax down by 1%, Spain\u2019s Ibex losing 0.95% and Italy\u2019s FTSE MIB dipping by 0.7%.<\/p>\n

Eurozone government bond yields also rose, and France\u2019s 30-year government bond yields rose to their highest levels in more than 16 years on Tuesday, driven by fiscal concerns.<\/p>\n

French bonds are under pressure as the prime minister, Fran\u00e7ois Bayrou, holds talks with political parties in a bid to prevent a government collapse before next week\u2019s confidence vote.<\/p>\n

France\u2019s 30-year government bond yield hit its highest since June 2009 at 4.513%, up 6.5 basis points.<\/p>\n","protected":false},"excerpt":{"rendered":"Britain\u2019s long-term borrowing costs have hit their highest level in 27 years, intensifying the pressure on chancellor Rachel…\n","protected":false},"author":2,"featured_media":108889,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[49,50,51,47,52,48],"class_list":["post-108888","post","type-post","status-publish","format-standard","has-post-thumbnail","category-headlines","tag-headlines","tag-news","tag-top-news","tag-top-stories","tag-topnews","tag-topstories"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/108888","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=108888"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/108888\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/108889"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=108888"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=108888"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=108888"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}