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UK government debt was caught up in yesterday’s bond sell-off too, with the yield on 10-year gilts jumping 1.8% towards its highest level since the 2007 financial crisis.
Rising gilt yields will eat into the government’s ‘headroom’ to keep within its fiscal rules, as they show the cost of servicing the national debt, and issuing new bonds, has risen.
Government figures are preparing to argue that maintaining March’s buffer is unnecessary at a time when borrowing and energy costs have risen sharply.
One person involved in the government’s discussions has suggested that headroom of £15bn would be sufficient, while another suggested closer to £20bn, and a third said no figure was yet being targeted.
The 10-year yield rose 10 basis points to 3.075% on Thursday, its highest since 1996, after the three-day break. The five-and 20-year rates also gained about 10 basis points each to 2.375% and 3.915%, respectively.
