Pound falls further as borrowing costs rise again

The pound has fallen to its lowest value against the dollar since November 2023, while government borrowing costs continue to rise.

The pound fell to $1.21 on Monday morning as recent selling continued.

Meanwhile, the rate at which the government can borrow money – known as the yield – rose again, reaching its highest level since 2008 by one measure.

Borrowing costs are rising for many countries around the world, although some have said that decisions taken in the budget have left Britain particularly vulnerable.

Governments typically borrow money by selling bonds to large investors such as pension funds. UK government bonds are known as gilts.

The yield on 10-year gilts – the interest rate at which the government pays back decade-old debt to investors – rose to 4.89%, its highest level in almost two decades.

The 30-year gilt rose to 5.5%, its highest level in 27 years.

Government debt costs have also increased in Germany, France, Spain and Italy as soon as the markets opened on Monday morning.

Some experts say investors are reacting to the re-election of the former US president Donald Trump and his conversation about tariffs,

There are concerns that this will lead to inflation being more persistent than before, and therefore interest rates in the US and elsewhere will not fall as quickly as expected.

Strong US jobs data released on Friday also increased expectations that US rates will remain high for longer and helped strengthen the value of the dollar against other currencies.

However, Emma Wall, head of platform investors at Hargreaves Lansdown, said the UK’s problems are not entirely due to global issues, arguing that the measures announced in the Budget have fueled inflation.

“If you can get inflation under control, you will see interest rates come down in the UK,” he said.