By Adrian Kerr
U.K. borrowing costs and the British pound steadied Tuesday, with Treasury Chief Rachel Reeves set to face questions in Parliament around the recent turmoil in bond markets.
The 10-year gilt yield was pretty much flat at 4.873% by midday in London, according to Tradeweb, as was the 30-year gilt yield, at 5.423%. Long-dated gilt yields hit multi-year highs last week, part of a global fall in bonds amid investor concerns over the slower pace of rate cuts by the U.S. Federal Reserve.
An auction of the 30-year index-linked gilt on Tuesday, meanwhile, attracted relatively strong demand, with the real yield edging slightly lower afterward.
The pound also steadied after it fell on Monday to a two-year low against the dollar and its weakest in 10 weeks against the euro. It was recently at $1.2181, having fallen as low as $1.2100 on Monday, according to FactSet.
Under-fire U.K. Treasury Chief Rachel Reeves will appear in Parliament later after returning from a visit to China, where she will face questions around the recent surge in U.K. borrowing costs that threaten the government's spending plans. The gilt market weakness mirrors a recent jump in bond yields globally, particularly in U.S. Treasurys. After expectations of steady interest-rate reductions in recent months, inflation has proven stubborn in many areas, forcing investors to re-evaluate those bets and sell off bonds.
The stabilization in U.K. assets comes as global markets overall were calmer Tuesday. The 10-year U.S. Treasury yield was recently flat at 4.786% after earlier being down around four basis points.
Equities markets were up after recent falls, in part based on a Bloomberg report that said U.S. President-elect Donald Trump's incoming team are discussing slowly ramping up tariffs in a phased approach that would seek to limit inflation spikes. U.S. stock futures were recently up between 0.3% and 0.5%, while in Europe the Stoxx 50 of leading blue chips was up 1.0%.
The selling pressure on government bond markets is subsiding, but they aren't out of the woods yet, Commerzbank's head of rates and credit research Christoph Rieger said in a note, with real yields rising to historic highs ahead of key U.K. and U.S. CPI data on Wednesday.
-Emese Bartha and Miriam Mukuru contributed to this article.
Write to Adrian Kerr at adrian.kerr@wsj.com
(END) Dow Jones Newswires
01-14-25 0744ET
