Cost of borrowing for UK government shoots up on inflation worries

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THE UK’s cost of borrowing hit its highest point since the Brexit vote today as markets shunned the nation’s debt on inflation fears.

The sell-off drove returns on 10-year UK gilts past 1.3% for the first time since the vote.

This is good news for firms struggling with pension deficits, but bad news for longer-term interest rates and a Chancellor struggling to balance the books.

The re-emergence of inflation, driven by the pound’s slump since the referendum, has made sterling-priced assets like gilts far less attractive to investors. 

A stronger economy, meanwhile, has cut the chances of the Bank of England buying up more debt under quantitative easing, taking a major buyer out of the market.

“We are getting rising inflation pressure not only in Europe but the UK and US as well, as there is less chance of easing from central banks,” CMC Markets analyst Michael Hewson said.

Source Article from http://www.standard.co.uk/business/cost-of-borrowing-for-uk-government-shoots-up-on-inflation-worries-a3381396.html

October 29, 2016 |
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