Global bond sell-off intensifies as US-Iran tensions stoke inflation fears
UK borrowing costs driven up, adding to challenges facing John Healey as he prepares for first budget
TL;DR
- Global government bond sell-off resumed, increasing UK borrowing costs.
- 10-year UK gilt yields hit highest level since mid-2008, nearing 5.3%.
- Investor fears about inflation and deficits intensified after US-Iran exchanges and oil price increases.
- Higher bond yields increase government debt financing costs.
- UK fiscal headroom may be significantly reduced, potentially less than £14bn, impacting John Healey's budget.
- Healey faces pressure to choose between tax increases or spending cuts, and to fund higher defence spending.
- Asian stock markets also fell sharply amid global market jitters.
- US attempts to influence financial markets, including supporting the yen and buying back treasuries, have not been successful.