UK government borrowing costs reach near 16-year high as yields rise

UK government borrowing costs have increased, with the 10-year gilt yield rising to 4.85 percent, close to a 16-year high. This follows a peak of 4.93 percent on Thursday, driven by global inflation concerns. The rise in yields raises concerns about the government's borrowing capacity under Labour's budget rules. Chancellor Rachel Reeves has limited fiscal headroom, with only £9.9 billion available against revised targets. Investors are uncertain about the government's next steps, including potential spending cuts or tax increases. Labour officials have attempted to reassure the market about their commitment to economic stability.