Government borrowing costs hit multi-decade highs amid bond market sell-off
Borrowing costs for governments have surged to levels not seen in decades, driven by a renewed bond market sell-off linked to rising oil prices and geopolitical tensions. The UK's Treasury 10-year interest rate climbed above 5.3%, while its 20-year borrowing cost hit over 5.8%—the highest since 1998. This increase threatens to reduce John Healey’s fiscal flexibility by around £10bn ahead of his first Budget next month, according to economists at the Item Club. The rise in rates follows a sharp jump in oil prices and concerns about inflationary pressures from Houthi rebel advances near key shipping routes like the Bab el-Mandeb Strait. The US Treasury also sold $22 billion worth of 30-year bonds at record-high interest rates, signaling global financial strain due to ongoing conflicts. The European Central Bank (ECB) raised its benchmark rate by a quarter-point amid growing inflation concerns and warned that energy shocks could intensify further.
Topics: bond market central banks inflation oil prices