Global bond sell-off intensifies, as UK long-term borrowing costs pass 6%

The turmoil in global bond markets intensified on Thursday amid fears that the US deficit is reaching unsustainable levels, helping drive UK long-term borrowing costs to a 28-year high. The threat of renewed inflation from the persistently high cost of oil has spooked investors, who believe central banks will be forced to raise rates in the coming months to prevent price increases from becoming embedded.

In a morning of hectic trading, the yield on Britain’s 30-year bonds hit 6% for the first time since 1998. The yield on five- and ten-year UK bonds also rose, driving up the government’s borrowing costs and adding to the pressure on Chancellor John Healey before the budget later this month.

Stock market investors also sold heavily, knocking 1.7% off the London stock market in early trading. Bourses in Europe were also affected, with Germany’s Dax and France’s CAC 40 falling by 1.1%.