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UK government borrowing costs edged higher 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 points to 4.84 percent but was below Thursday’s 4.93 percent, the highest since 2008. Yield moves inversely to price.
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 sticky inflation in some major economies.
Analysts said closely watched US jobs data for December, due later on Friday, would help drive the direction of bond yields, including gilts.
The UK has been particularly hard hit by the global sell-off as investors worry about the government’s heavy borrowing needs and the growing threat of stagnant inflation, which combines anemic growth with persistent price pressures.
The credibility of the government’s economic plan is vulnerable to pressure on bond markets after Chancellor Rachel Reeves left just £9.9bn of headroom against her revised fiscal rules in last year’s Autumn Budget.
That budgetary wiggle room is under threat as gilt yields rise. The level of bond yields is an important determinant of budget headroom, with implications for the government’s interest bill, which exceeds £100bn a year.
Labor sought to reassure investors this week, with UK Treasury number two Darren Jones telling MPs on Thursday that the government was committed to “economic stability and sound public finances”.
