British 10-year borrowing cost tops 3.5% for first time in over a decade     

The yield on the Irish 10-year bond traded at over 2.54%
British 10-year borrowing cost tops 3.5% for first time in over a decade     

It reflects investors' unease around the economic plans of British Prime Minister Liz Truss that has already seen sterling fall to $1.121, a 37-year low. 

The implied cost of borrowing for 10 years for the British state rose to over 3.5% for the first time since April 2011 — the biggest such rise since March 2020, when the onset of the Covid-19 pandemic sparked market chaos.

It comes following rate hikes by the Bank of England and the US Federal Reserve but also reflects investors' unease around the economic plans of Prime Minister Liz Truss that has already seen sterling fall to $1.121, a 37-year low. 

The yield on the Irish 10-year bond traded at over 2.54% and the equivalent bond in Germany was at 1.97%, while the Italian bond was at almost 4.2%.    

The potential scale of additional UK government borrowing implied by Ms Truss's plans has undermined investor confidence in gilts over the last month. Britain's Chancellor of the Exchequer, Kwasi Kwarteng, is due to provide details on tax cuts and plans to help households and businesses struggling with high energy costs on Friday.

Marc Ostwald, chief economist at brokerage ADM Investor Services, said much of the sell-off in gilts reflected reaction to the Fed decision on Wednesday night. But part of it was also due to concern over the UK government's spending plans, Mr Ostwald said. 

Reuters and Irish Examiner

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