UK borrowing costs rise at fastest pace in G7 as bond yields hit 27-year high

"Britain's borrowing costs are rising faster than any other G7 country, with long-term debt yields hitting their highest level in nearly three decades amid investor unease over Labour's economic strategy. The yield on 30-year gilts - the return investors demand for lending to the UK government - climbed to 5.64% on Monday, a level not seen since 1998. The surge followed a reshuffle of Sir Keir Starmer's senior economic team, which brought advocates of wealth taxation into the heart of Downing Street."

"The Prime Minister appointed Darren Jones, previously deputy to Chancellor Rachel Reeves, as Chief Secretary to the Treasury. He also drafted in Baroness Shafik, a former deputy governor of the Bank of England, as chief economic adviser. Shafik has previously argued for higher taxes on inheritance, land and property. Meanwhile, James Murray, the Treasury minister, will replace Jones, while Dan Tomlinson - another Resolution Foundation alumnus - steps in as Exchequer Secretary."

"The moves come as Reeves faces the challenge of filling a £50bn fiscal gap ahead of her autumn Budget. Analysts say markets are worried that Labour lacks a credible plan to get public finances under control. Simon French, chief UK economist at Panmure Liberum, said: "The immediate market reaction is not exactly a vote of confidence on these moves. Yields were pushed higher as investors also prepared for the Treasury to issue more debt.""

UK long-term government bond yields have surged to levels not seen since 1998, with the 30-year gilt yield reaching 5.64%. The rise followed a reshuffle that placed officials who have advocated wealth taxation into senior economic roles, including appointments of Darren Jones and Baroness Shafik and promotions of James Murray and Dan Tomlinson. Tomlinson and others have argued that wealth is relatively under-taxed and criticised shielding capital income. The Treasury faces a £50bn fiscal gap ahead of the autumn Budget, and markets are concerned about the credibility of fiscal plans amid wider global bond-market pressures.

Read at Business Matters