UK Gilt Yields Spike as USD Surges

United Kingdom, USA
Government
Currency, Foreign Exchange, Investment, Regulatory & Government

(9 January 2024 – United Kingdom) The greenback is continuing to appreciate strongly, compounding weakness in Sterling as Treasury yields held at elevated levels on concerns over tariffs under incoming President Elect Trump.

 

US Treasury yields are in a firm uptrend, with the benchmark ten-year note hitting nine month high of 4.73 percent as a resilient economy and threatened tariff war stoke inflation concerns and heighten expectations the Federal Reserve will adopt a slower path of interest rate cuts.

 

Sterling fell further to its lowest trading levels in more than a year as UK government borrowing costs steadied near their highest level since the global financial crisis (GFC). The sustained rise in government bond yields globally is driven by stubborn inflation in G20 economies.

 

The UK has been hit particularly hard by the global bond correction because of the Labour government’s heavy borrowing burden and growing threat of stagflation.

“How Chancellor Rachel Reeves chooses to address the lack of fiscal headroom will be key. Investors are questioning which will be the chancellor’s next options – spending cuts, more borrowing or taxes” stated TD Securities UK Rates Strategist, Pooja Kumra.

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