LONDON (Reuters) – British government borrowing costs fell on Tuesday to their lowest since before the start of this month’s selloff as investors on both sides of the Atlantic breathed a sigh of relief about Donald Trump’s first moves as U.S. president.
Thirty-year gilt yields – which were hit hardest in this month’s selloff – sank to their lowest since Jan. 3 at 5.139%, extending their recent fall into a fifth day. Ten-year yields also touched a post-Jan. 3 low at 4.582%.
Investors offloaded UK government bonds heavily in the first half of January amid a broader selloff of state debt on worries about U.S. inflation pressures resulting from Trump’s policies.
The increase in UK borrowing costs had threatened to knock finance minister Rachel Reeves off track for meeting her fiscal rules, possibly requiring her to cut spending as soon as March to get back on track.
Trump only briefly mentioned import tariffs in his inauguration speech on Monday and U.S. Treasury yields – which influence British gilts – fell to their lowest since early January on Tuesday.
Also on Tuesday, Britain’s debt office attracted record orders for its syndicated sale of a 15-year conventional gilt.
Two-year British government borrowing costs – which are particularly sensitive to speculation about interest rate cuts – fell to their lowest since Dec. 16 at 4.307%.
Investors were putting the chance of a quarter-point Bank of England interest rate cut on Feb. 6, after its February monetary policy meeting, at about 86%.
(Writing by William Schomberg; Editing by Gareth Jones)
