UK government borrowing costs hover near 16-year high

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UK government borrowing costs rose on Friday but remained below Thursday’s peak as investors awaited a key US jobs report later in the day.

The 10-year gilt yield rose 0.03 percentage point to 4.84 percent, but was still below the 4.93 percent level seen on Thursday, the highest since 2008. The yield is moving in reverse the prices.

Sterling fell 0.2 percent to $1.229 against the dollar.

Gilts have suffered in recent sessions amid a global rise in government bond yields, driven by persistent inflation in some major economies.

Analysts said a close watch on U.S. jobs data for December, due later Friday, will help guide the direction of bond yields, including gold.

The UK has been hit particularly hard by the global sell-off as investors worry about the government’s large borrowing needs and the growing threat of stagflation, which combines anemic growth with persistent price pressures.

The credibility of the government’s economic plans is vulnerable in the bond market after Chancellor Rachel Reeves left herself with just £9.9 billion against her revised fiscal rules in last year’s Autumn Budget.

Rising gilt yields have since put that budgetary flex room under threat.Bond yields are a key determinant of the overall budget, given its impact on government interest rates of more than £100 billion a year.

Labor sought to reassure investors this week, with Darren Jones, the UK Treasury’s number two, telling MPs on Thursday that the government was committed to “economic stability and sound public finances”.