This week, the cost of borrowing for the UK government has escalated at a rate double that of other nations, coinciding with the pound reaching its lowest value since 2023.

The yield on the 10-year benchmark UK government bond has surged by nearly 20 basis points since Monday, reaching levels not seen since 2008. In comparison, the yields on similar US and German government bonds have only seen an increase of about 10 basis points in the same timeframe.

The ascent of UK bond yields persisted on Friday following a brief pause on Thursday, with the 10-year bond yield rising by 2 basis points to 4.84 percent. Meanwhile, the 30-year bond yield rose by 1 basis point to 5.4 percent, marking a return to a 27-year peak.

The pound depreciated by 0.9 percent against the dollar, hitting $1.226 on Thursday. The currency’s decline over the past three days amounted to 2 percent, the steepest drop since February 2023, although it recovered slightly in the afternoon to $1.231. On Friday, it edged up to $1.2391.

The FTSE 100, which saw an increase of 0.83 percent to 8,319.70 on Thursday, showed little movement in early trading on Friday. Similarly, the FTSE 250 rose by 0.27 percent, or 52.90 points, bringing it to 20,005.14 after a substantial drop earlier in the day, before stabilizing.

Market analysts attribute the rise in UK government bond yields to the increasing borrowing costs in the US.

Peder Beck-Friis, an economist at Pimco, one of the largest bond investment firms globally, noted, “While UK-specific factors such as the budget have played a role in this rise, the majority of the increase has been driven by the climbing US treasury yields in the same period.” Despite recent heavy selling, Pimco remains optimistic about UK bonds.

Bruna Skarica, Chief UK Economist at Morgan Stanley, expressed uncertainty about the reasons behind this sharp shift in the UK market. “There were no significant data updates or policy announcements, and neither did any new major issues arise this week.”

She speculated, “Perhaps a combination of new issuances and concerns regarding fiscal pressures may have triggered the movement, compounded by recent global trends in the rates markets.”

Bank of America claimed that the current volatility in the bond market is being overstated in comparison to the aftermath of the mini-budget, asserting that investors are more focused on “the persistence of inflation, exacerbated by global tariff concerns, which we believe are valid.”

Recent data from the Organisation for Economic Co-operation and Development (OECD) indicated that UK inflation in November was the highest among G7 countries.

While US stock markets were closed on Thursday in remembrance of former President Jimmy Carter, the US bond market remained open, with the yield on the 10-year US treasury slightly decreasing to 4.673 percent.