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On Monday the pound has fallen to its lowest rate in 14 months trading at 1.2149 against the US dollar.
The 10-year gilts yields have risen to 4.89% which is the highest since the financial crisis in 2008 and the FTSE 100 was scheduled to start 22 points lower at 8226 which dropped .9% since Friday.
Gilt yields reflect the cost of government borrowing and the yield on 30-year gilts hit 27 year highs up by 5 basis points to 5.5%.
Experts at Trading Economics said, “Typically, higher yields typically boost a currency, but the decline points to capital flight driven by fears of persistent inflation and fiscal instability.
“Rising borrowing costs also strain Chancellor Rachel Reeves, whose fiscal flexibility is shrinking. In October, Reeves unveiled a budget including £142billion in borrowing and a £74billion annual spending increase, raising fiscal sustainability concerns.
“Inflation fears also persist, with CPI, wage growth, and inflation expectations rising.”
Oliver Faizallah, head of fixed income research at Charles Stanley said, “We’ve seen a global bond sell off driven by elevated inflation globally, volatile politics and political policy (with US tariffs being a large focus on future inflation) and increasing government debts.
“UK government bonds have been punished and sold off more so than the rest of the world. This seems to be due to concerns around sticky inflation leading markets to believe we’ll have higher interest rates for longer.”
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