What’s going on with U.K. bonds?
Marketplace All-in-One
Marketplace
4.5 • 1.4K Ratings
🗓️ 10 January 2025
⏱️ 7 minutes
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Summary
From the BBC World Service: U.K. government borrowing costs are hovering near a 16-year high, as bond yields have surged, inflation is proving sticky, and the value of the pound has drooped. What’s causing the uncertainty? Plus, Ethiopia has a stock exchange again after 50 years. And later: Shipping giant Maersk warns that only half of its ships are arriving on time and warns of more volatility on the way.
Transcript
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| 0:00.0 | These days, it's costing a lot more for the UK government to borrow money. |
| 0:06.1 | Live from the UK, this is the Marketplace Morning Report from the BBC World Service. |
| 0:10.4 | I'm Leanna Byrne. Good morning. |
| 0:12.3 | British government borrowing costs are still hovering near a 16-year high. |
| 0:16.6 | And that's because the yield on the UK's 10-year bond, which is basically the interest rate Britain pays investors who landed money, has surged. And just a reminder, bonds are like IOUs that governments and companies sell to raise cash, promising to pay back later with interest. To explain more, let's talk to Ross Mould, investment director at investment company, AJ Bell. Hello. |
| 0:39.7 | Hello, Leanna. |
| 0:40.7 | Ross, tell us why these bond yields or the guilty yields, as we call them here in the UK. Why are they surging? |
| 0:47.8 | There are two or three reasons. First is that inflation is proving stickier than expected. |
| 0:52.5 | That means that markets are now expecting fewer interest rate |
| 0:55.0 | cuts from the Bank of England this year, and that's having a knock-on effect upon government borrowing |
| 0:58.6 | costs. You've got ongoing concerns over UK government debt, but this debt issue is not unique |
| 1:04.2 | to the UK. Yields are going up in France, the UK, and, dare I say, America, even though central |
| 1:10.7 | banks are cutting rates, for all these |
| 1:12.2 | reasons, financially investors are looking at government debt going up and thinking, maybe we |
| 1:16.0 | should be demanding a higher interest rate here to compensates for the extra risk presented by all |
| 1:20.0 | this borrowing by governments. So when people are looking for a reason, people are saying, |
| 1:24.1 | is this international? Is it domestic? I mean, what's your take on that, |
| 1:27.9 | Ross? I think for the UK, it's a combination of the two. You may remember that a former Bank of |
| 1:32.2 | England Governor, Mr Mark Carney, said that the UK was dependent upon the kindness of strangers |
| 1:36.9 | because it spends more than it generates in tax and it imports more than it exports. So there's |
| 1:42.0 | money flowing out all the time not flowing in, |
| 1:44.4 | and you need other people to fund that and actually lend you the money. And that is, |
... |
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