By David Milliken and Harry Robertson
LONDON (Reuters) – British government bond prices fell sharply on Wednesday, pushing benchmark 10-year yields to their highest since October 2008, while 30-year yields hit a new 26-year high in a move that will add pressure to government finances.
Sterling tumbled as well, shedding more than 1% against the U.S. dollar to fall to its lowest since April at $1.2322, in a move that started around 1100 GMT and had no obvious trigger from economic data.
Thirty-year gilt yields – which hit a record on Tuesday – rose by 12 basis points to strike their highest since August 1998 at 5.367% at 1232 GMT.
Benchmark 10-year yields rose as high as 4.807%, also up 12 bps on the day, breaking past a level that had held since October 2023.
Gilts underperformed relative to U.S. Treasuries and German government bonds, whose yields rose by around 4 basis points.
“This is a global move but it’s being led by the UK,” said RBC fixed income strategist Megum Muhic.
“Potentially, a reason why is the technical break is more significant versus other jurisdictions. The UK is at highs of this cycle whereas in Europe and the U.S. this isn’t the case. We’re in new uncharted territory for this cycle,” he said.
British government bond yields have climbed steadily since September, reflecting reduced market expectations of Bank of England rate cuts, extra borrowing in the new government’s Oct. 30 budget and higher U.S. Treasury yields as President-elect Donald Trump is expected to pursue a loose fiscal policy and raise tariffs.
Financial markets price in just two quarter-point rate cuts by the BoE this year – which would take Bank Rate from 4.75% to 4.25% – compared with four seen by economists polled by Reuters last month.
British mid-cap shares were down 1.7% at 1227 GMT while the blue-chip FTSE-100, whose members often benefit from sterling weakness, was 0.35% lower, in line with European shares.
(Reporting by David Milliken and Harry Robertson; additional reporting by Lucy Raitano,; Editing by William Schomberg and Ed Osmond)
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