UK pays highest borrowing cost since 1998 at gilt sale

{"text":[[{"start":7.68,"text":"The UK has paid the highest borrowing cost on a sale of its debt in almost three decades, as the global bond sell-off intensifies the pressure on public finances ahead of a crunch Budget."}],[{"start":18.04,"text":"A £4bn sale of 30-year debt on Tuesday was priced at a yield of 5.82 per cent, the UK Debt Management Office said, the highest interest rate on any gilt issuance since the DMO’s creation in 1998."}],[{"start":32.58,"text":"“The success of the transaction, notwithstanding a volatile market environment, provides further demonstration of the ongoing strength and depth of the gilt market and the valuable support from its participants for our financing programme,” said Jessica Pulay, the DMO’s chief executive."}],[{"start":49.08,"text":"The sale crystallises a three-decade high in the UK exchequer’s long-dated borrowing costs, after the Iran war and concerns over a global debt glut added to a sharp rise in yields since the Covid-19 pandemic."}],[{"start":60.8,"text":"“While the gilt moves we’re seeing can all be tied directly to global markets, it’s still a big shift higher in domestic borrowing costs,” said Gordon Shannon, a fund manager at TwentyFour Asset Management. “It will undoubtedly constrain the government’s options” in the Budget next month, he added."}],[{"start":77.64,"text":"The record yield on the newly issued debt underscores the pressure on public finances from rising interest costs, which are already running at £110bn a year in the UK and exceed other major areas of government spending."}],[{"start":null,"text":"

"}],[{"start":89.56,"text":"“If debt interest were a government department, it would be the second biggest in Whitehall after health, bigger than defence, the Home Office and justice put together,” chancellor John Healey said in a speech on Monday, as he vowed to “be honest” about the need to control spending at the Budget."}],[{"start":106.44,"text":"Investors said the sale had been received well by the market, attracted by the UK’s high yields compared with peers."}],[{"start":111.76,"text":"“What is pain for some is pleasure for others,” said Stephen Jones, chief investment officer at Aegon Asset Management. “Investors are taking the view that there is enough yield on the table here to top up holdings in gilts.”"}],[{"start":124.36,"text":"The total order book was above £85bn for Tuesday’s syndication, according to earlier details sent to investors."}],[{"start":132.08,"text":"The DMO plans to sell £250bn of gilts this year to fund the government’s spending plans."}],[{"start":139,"text":"The UK’s 10-year borrowing costs, which are the more closely watched indicator, are the highest in the G7 at 5.2 per cent. The DMO has already paid its highest 10-year borrowing cost since 2008 earlier this year, after yields climbed."}],[{"start":155.36,"text":"The global bond sell-off has been fuelled by a surge in energy prices since the outbreak of the Iran war that has upended investors’ expectations of interest rate cuts from major central banks, including the Bank of England."}],[{"start":167.84,"text":"Brent crude prices, the global benchmark, have climbed back close to $100 a barrel as the conflict has dragged on, extending the inflation and growth hit to the global economy."}],[{"start":179.28,"text":"Long-term borrowing costs elsewhere in Europe hit new highs on Tuesday, with the yield on French government 30-year bonds rising to 5.02 per cent, their highest since September 2008. Yields on 30-year German Bunds rose to 3.86 per cent, their highest since 2011."}],[{"start":198.6,"text":"Traders are expecting the BoE to make at least one quarter-point increase to its benchmark rate by the end of this year, according to market pricing."}],[{"start":206.52,"text":"Such a move is viewed as unlikely to come at this month’s meeting, but investors do expect the BoE to slow the pace of its gilt sales, which have added to the upward pressure on long-term bond yields."}],[{"start":221.59,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1788929530_7677.mp3"}