British government borrowing costs have climbed at twice the pace of international peers this week, whilst sterling dropped to its lowest level since 2023, signalling mounting pressure on the UK economy.
The benchmark 10-year UK government bond yield has risen by approximately 20 basis points since Monday, reaching levels not witnessed since 2008. This stark increase contrasts sharply with US and German government bonds, which saw more modest increases of around 10 basis points during the same period.
The upward trajectory of UK bond yields persisted into Friday following Thursday’s brief respite, with the 10-year bond yield climbing an additional 2 basis points to 4.84 per cent. The 30-year bond yield edged up 1 basis point to 5.4 per cent, marking a 27-year peak.
Sterling experienced significant pressure, declining 0.9 per cent against the dollar to $1.226 on Thursday. The currency’s three-day losses reached 2 per cent, marking the most substantial decline since February 2023, before recovering slightly to $1.231. By Friday, the pound had strengthened marginally to $1.2391.
Leading investment analysts at Pimco, one of the world’s largest bond traders, attribute the surge in UK government bond yields primarily to rising US borrowing costs. However, domestic factors, including budget considerations, have played a contributing role in the yield increases.
The Organisation for Economic Co-operation and Development’s recent data revealed that UK inflation remained the highest among G7 nations in November, underlining the persistent economic challenges facing the British economy. Bank of America analysts have dismissed comparisons to the mini-budget turbulence, suggesting that market concerns centre primarily on sustained inflation pressures and global tariff anxieties.
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