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Hello and welcome to Coffee House Shots.

I'm James Hill and I'm joined today by Kate Andrews and Fraser Nelson.

Now Kate, guilt markets are back in the...

...use this week. Why is that?

I know I'm so sorry to tell our listeners that we're all glued to the guilt yield graphs again.

A throwback to last autumn after the mini budget when we saw that borrowing costs for the UK

started to rise quite significantly and the 10-year guilt yields are as high as they have been

since last autumn. We started noticing this a few days ago and it came after the inflation update.

Now you'll have seen a lot of positive headlines around that inflation figure and the government

was really trying to make a lot out of it saying, look, the headline rate of inflation has fallen.

From 10.1% on the year in March down to 8.7% in April.

But the truth was that underneath that headline figure there was a lot of bad information and of

course the markets picked up on that immediately. Mainly that core inflation was actually on the rise

and it does seem like inflation is becoming more embedded into the system.

So the assumption is there's going to be at least another interest rate hike if not several.

Markets are factoring that in as a result borrowing costs are going up but I think the real fear

if we look at the numbers today is that they continue to rise on Thursday overtaking Italy

...