UK borrowing costs hit 27-year high adding to pressure on Reeves

Long-term government borrowing costs in the UK reached their highest level since 1998 on Tuesday, as concerns over the country’s economic outlook combined with a global move higher in bond yields.

The move adds to the pressure on Chancellor Rachel Reeves ahead of the upcoming Budget, where expectations are rising that she will increase taxes to bolster government finances.

The interest rate on 30-year government bonds, known as the yield, jumped to 5.698%, its highest level for 27 years.

On the currency markets, the pound also fell more than 1% against the dollar on Tuesday morning.

Government bonds have been under pressure globally for a number of months, in part due to volatile US trade policy.

The yield on 30-year UK government bonds – known as gilts – has been rising for some months, and this adds to the cost of UK government debt due to higher interest payments.

However, when it comes to satisfying government forecaster the Office for Budget Responsibility (OBR) that the chancellor is meeting her self-imposed fiscal rules, the OBR looks at 10-year borrowing costs, rather than 30 years.