UK Pays Highest Bond Rate Since 1998 Amid Fiscal Pressures

The UK government has paid the highest interest rate on a 30-year bond since 1998, a development that underscores the fiscal pressures facing Chancellor John Healey. The Treasury paid a yield of approximately 5.83 percent to borrow billions of pounds on Tuesday, marking the steepest rate for such long-dated debt since the Debt Management Office was established in that year. This costly auction reflects a broader global bond market selloff, which has driven up yields on government borrowing worldwide. Investors have been demanding greater compensation for holding long-term government debt, citing concerns over persistent inflation fueled by rising energy prices, particularly following the resumption of conflict in the Middle East and attacks on Russian refineries. The global rout in bond markets has notably impacted the UK, with British government bond yields rising faster than those of any other G7 economy in recent weeks. This heightened cost of borrowing is expected to significantly reduce the fiscal headroom available to the government ahead of the Budget scheduled for October 28.