Aysu Bicer
09 January 2025•Update: 09 January 2025
LONDON
The pound sterling has dropped to its lowest level in 14 months, trading at around $1.226 in early trading in London, as concerns over the UK’s borrowing costs and a global bond market sell-off continue to rattle investors.
This marks sterling's weakest performance since November 2023, reflecting rising anxiety over UK assets as borrowing costs hit historic highs.
The UK’s 10-year borrowing costs surged to their highest level since 2008, while 30-year bond yields climbed to levels not seen since 1998.
The steep rise in borrowing costs has intensified market worries about the sustainability of the UK’s public finances at a time when the US dollar is strengthening globally.
In response, Shadow Chancellor Mel Stride raised an urgent question in the House of Commons, highlighting the growing pressure of higher borrowing costs on the government’s fiscal outlook.
The question was directed to Chancellor Rachel Reeves but answered by Darren Jones, chief secretary to the treasury, in her absence.
Addressing MPs, Jones acknowledged the market turbulence but maintained that financial markets are “always evolving.” He reiterated the government’s long-standing policy of not commenting on specific market movements, a convention he said he would uphold.
“Changes to bond yields are determined by many factors, both international and domestic,” Jones said, offering little reassurance to MPs seeking clarity on the government’s fiscal strategy.
The situation has sparked calls for urgent government intervention.
Liberal Democrat leader Ed Davey urged Chancellor Reeves to cancel her scheduled trip to China and make an emergency fiscal statement to Parliament.
Davey proposed scrapping the planned national insurance hike in April to stimulate economic growth and create room for the Bank of England to reduce interest rates.
“This is a moment for decisive leadership,” Davey said, emphasizing the need to restore confidence in UK financial markets.
