The yield that the UK government pays on its 30-year government bond rose above six per cent for the first time in this millennium, reaching 6.04 per cent in the early hours of trading on Thursday. This marks the first time the 30-year yield has hit six per cent since 1998.
Long-term gilt yields determine the size of UK government borrowing costs. The higher level of these costs comes at a challenging time for Chancellor John Healey, with the Budget less than four weeks away.
The Office for Budget Responsibility (OBR) had forecast debt interest payments to total £134.7bn in the spring. The rise in yields since March is likely to lead the OBR to increase its forecasts for these costs. Economists suggest a one percentage point rise in rates reflects an additional cost of £15bn by 2031.
UK bonds were among the worst performers in a global sell-off on Thursday, with yields rising higher than in the US, Japan, and Germany. The FTSE 100 also dropped by nearly two per cent amid wider market turmoil.