UK 30-YEAR GILT YIELDS HIT 6% FOR FIRST TIME SINCE 1998

UK government bond yields reached 6% for the first time in almost 30 years on Thursday, as a global sell-off in bonds pushed borrowing costs higher ahead of Chancellor John Healey's first Budget later this month. The yield on 30-year gilts touched 6.07% in morning trading, according to the Daily Mail, the highest level since 1998. The turmoil spread into equities, with London's FTSE 100 Index falling by 2%, shedding 209 points to stand at 10,397.1 just over an hour after markets opened. Markets across Europe also fell, with Germany's Dax and France's Cac 40 both down 1.3%. Government bonds slumped globally, with the US 10-year bond yield reaching its highest level since 2002.

Rising gilt yields mean it costs the government more to borrow from financial markets, intensifying pressure on the public finances as Healey prepares to set out his economic plans. Axel Rudolph, chief technical analyst at IG, said higher yields put further pressure on the public finances and make it harder to balance spending commitments with the need to control borrowing, adding that a recent fall in oil prices had not eased the pressure on bond markets. Brent crude fell 2% to 99.9 US dollars a barrel, below 100 dollars, on signs that Middle East crude flows had returned to levels seen before the Iran war. Neil Wilson, investor strategist at Saxo UK, described a "relentless rout" in the bond market that was prompting investors to seek safer assets.

Susannah Streeter, chief investment strategist at Wealth Club, said confidence in the FTSE 100 had been hit by concerns over potential higher inflation, increased refinancing costs and the resulting effect on spending. Rudolph said the Chancellor faces an increasingly narrow path as he prepares to set out his plans for the economy, with yields continuing to rise. The Budget is due later this month, with the scale of pressure on Britain's public finances and debt levels forming the backdrop to Healey's announcement. No further detail on the Budget's contents was confirmed in the reporting.