Bond rout deepens to ramp up pressure on Burnham

Britain’s bond market sell-off deepened on Wednesday as long-term government borrowing costs climbed to their highest level since 1998, according to The Telegraph. The rising yields pile fresh pressure on Prime Minister Andy Burnham ahead of the upcoming Budget.

The yield on 30-year UK gilts hit 5.89pc, coming less than 24 hours after the Prime Minister made his debut in the House of Commons. The UK economy is suffering amid a broader worldwide sell-off that escalated after the United States launched fresh strikes on Iran.

The military action triggered a spike in energy costs, pushing wholesale European gas prices to a three-year high. In turn, the yield on 10-year gilts rose to 5.25pc, a benchmark for Treasury borrowing costs not reached since 2007. Economists have previously warned that the Chancellor could need to find up to £14bn to restore public finance headroom.

Lord Jim O’Neill, an ally of the Prime Minister and former Goldman Sachs economist, heavily criticised the tone of Mr Burnham’s first appearance in the Commons. Speaking to LBC, Lord O’Neill said the speech was “the last thing investors wanted to hear” and warned,

If it stays like this, the mortgage rates are going up

— Lord Jim O’Neill, Economist, LBC

Global market turmoil and rising oil prices

The surge in bond yields follows a jump in Brent crude above $95 a barrel following US Central Command strikes against Islamic Revolutionary Guard Corps targets. President Donald Trump stated that he cared little for a new agreement, asserting control over the Hormuz Strait as the Iranian economy faces collapse.

• Thirty-year UK gilt yields hit 5.89pc, highest since 1998
• Ten-year gilt yields rose to 5.25pc, matching 2007 levels
• Brent crude surged past $95 a barrel following US strikes on Iran
• Economists estimate up to £14bn needed to restore public finance headroom

Ministers have insisted that the Prime Minister considers fiscal responsibility imperative and will stick rigidly to fiscal rules. International markets experienced similar contagion, with US 10-year Treasury bonds rising to a near three-year high of 4.81pc.

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p class=”source-link”>Original source: Read the full report at The Telegraph