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 have continued to rise.

The pound fell to $1.21 on Monday morning as the recent sell-off continued.

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

Borrowing costs for many countries are rising around the world, although some have said decisions made in the Budget have made the UK particularly vulnerable.

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

The 10-year bond yield – the interest rate at which the government pays back a decade-long loan to investors – has risen to 4.89%, its highest level in nearly two decades.

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

Government debt costs in Germany, France, Spain and Italy also rose when markets opened on Monday morning.

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

There are concerns that this will lead to inflation being more persistent than previously thought and therefore interest rates not falling as quickly as expected, both in the United States and elsewhere.

Strong U.S. jobs data released on Friday also raised expectations that U.S. rates will stay high for longer, and this has helped strengthen the value of the dollar against other currencies.

However, Emma Wall, head of investor platforms at Hargreaves Lansdown, said the UK’s problems were not caused purely by global issues, arguing that the measures announced in the Budget have stoked inflation.

“If inflation can be controlled, you will see interest rates lower in the UK,” he added.