Worries over the stagnating UK economy and accelerating inflation are unnerving investors, pushing borrowing costs to their biggest premium over German debt yields since 1990. The spread between the two countries’ 10-year bonds has risen above 2.3 percentage points, the highest since German reunification and eclipsing the peak reached after Liz Truss’s ill-fated “mini” Budget two years ago.
“If gilt yields blow above levels seen in the Truss tantrum, Rachel Reeves could end up breaking more promises and being forced to raise taxes or cut spending in order to allay concerns relating to debt sustainability.” The recent increase in yields from less than 4.2 per cent two weeks ago has come as traders bet the BoE will now make just two quarter-point cuts next year, down from four expected in October.