UK borrowing costs drop to lowest level in more than a year

"UK borrowing costs have dropped to their lowest level in more than a year, as investors were encouraged by more stable government finances and the prospect of further interest rate cuts. The yield, or interest rate, on 10-year UK government bonds fell to 4.34%, down from 4.41%, to the lowest level since December 2024, with the prospect of the UK public finances being put on a firmer footing lowering the risk of holding UK debt."

"The fall in UK yield on almost 3tn of UK debt represents a boost for Rachel Reeves, who fought hard inside government before November's budget to increase the Treasury's financial buffer and win over international investors who had become sceptical about the UK's ability to balance its books. Concerns before the budget triggered a rise in UK bond yields to the highest since 2008"

UK 10-year government bond yields fell to 4.34% from 4.41%, reaching the lowest level since December 2024 as expectations of further interest-rate cuts and firmer public finances reduced the perceived risk of holding UK debt. The decline across almost £3tn of gilts strengthens the Treasury position after measures to increase financial buffers before the November budget and helped regain investor confidence. European government bonds also fell while US borrowing costs remained steady amid uncertainty over the Fed. The Bank of England cut rates to 3.75% in December, and markets now price potential further cuts.

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