Global Bond Market Turmoil: UK Long-Term Borrowing Costs Hit 28-Year High

The global bond market is experiencing turmoil as investors fear that US deficits are reaching unsustainable levels. This has led to a significant increase in long-term borrowing costs for the UK, with its 30-year bonds hitting a 28-year high of 6% yield.

This sell-off is driven by concerns about inflation, particularly due to the persistently high cost of oil. Central banks are expected to raise interest rates in response to prevent price increases from becoming embedded.

The UK's 5- and 10-year bond yields have also risen, increasing the government's borrowing costs ahead of the budget later this month. The London stock market has been heavily affected, falling by 1.7% in early trading, while European markets such as Germany's Dax and France's CAC 40 have declined by 1.1%.

Mohit Kumar, an economist at Jefferies, notes that 'inflation, deficit and issuance concerns continue to weigh on the bond market.' He adds that there is a 'buyers' strike' as investors wait for stability before stepping in.