Official reports from the UK Treasury or financial market data providers such as Bloomberg or Reuters

UK 10-Year Yields Reach 4.9%, Pound Falls to Lowest Since 2023, Threatening Chancellor Reeves's Fiscal Plans

Jan 9, 2025, 08:30 AM

UK government bond yields surged on Thursday, with the 10-year gilt yield rising to 4.9% at the open, the highest level since 2008, and 10-year inflation-linked rates reaching 1.29%, the highest since 2009. Sterling fell to its lowest level against the US dollar since November 2023, sliding 0.9% to $1.226, while sterling's one-month implied options volatility soared to 10%, the highest since the March 2023 banking crisis. The sharp rise in borrowing costs has raised concerns over the UK’s fiscal stability, threatening to erode Chancellor Rachel Reeves's budget buffer ahead of an official fiscal update scheduled for March 26. Former Bank of England rate-setter Martin Weale warned that the government may have to resort to austerity measures if sentiment doesn't improve. The Treasury intervened to stabilize financial markets, stating that the gilt market is functioning as normal and underlying demand for UK debt is strong. The FTSE 250 Index fell as much as 1.1%, reaching its lowest point in eight months, as investor confidence waned.