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There is one thing scarier than markets lurching around. And that’s markets lurching around without a very compelling explanation.
Just yesterday, the yield on the government’s 30-year bonds – the best measure out there of the UK government’s long-term cost of borrowing – closed at the highest level since 1998, not long after Oasis released the album Be Here Now. Indeed, the yields on pretty much all UK government debt has been creeping up in recent weeks, though not all are back to Britpop era levels.
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In some senses, this looks very odd indeed. After all, the Bank of England just cut interest rates. In normal circumstances, you would expect measures of borrowing costs to be falling across the board. But clearly these are not normal times.
All of which raises the question: is this a UK-specific phenomenon? Are markets singling out Britain for particular concern, much as they did after Liz Truss’s notorious mini-budget? Actually, there are more questions on top of that one. For instance, is this all about Rachel Reeves’s recent woes, and her need to find another £20bn, give or take, to make her sums add up? Are investors fretting about the Bank of England’s inflation-fighting credibility, given its cutting rates even as prices rise?
The short answer, I’m afraid, is that no one really knows. But a glance at a few metrics can at least provide a bit of context.
The first thing to note is that while government borrowing costs in the UK are up, they have also been rising in other leading economies. The UK, it’s worth saying, is a bit of an outlier with higher…
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