Pound falls to 14-month low as bond sell-off piles pressure on Rachel Reeves

London: The pound is really feeling the heat right now. It’s hit a 14-month low against the US dollar, and it’s all because of a big sell-off in the bond market. This has got investors pretty anxious about UK assets, which is putting more pressure on Chancellor Rachel Reeves.

As the bond sell-off picked up speed, the pound lost a cent against the dollar, dropping to around $1.226. It’s not looking good, especially with UK borrowing costs rising again. Despite the government trying to calm things down, Reeves had to step in and reassure everyone that she’s got a handle on the public finances.

Michael Brown from Pepperstone is sounding the alarm, saying things are getting “rather ugly” in the UK. He pointed out that the rising bond yields and falling currency show that investors are losing faith in the government’s ability to manage the economy. While we’re not at the chaotic levels of the Truss/Kwarteng era just yet, it’s definitely shaky ground.

On Thursday morning, the yield on 10-year UK debt jumped to 4.921%, the highest it’s been since 2008. Thirty-year bond yields are also climbing, hitting 5.474%. Chris Turner from ING explained that the global bond market sell-off has really shaken things up in the UK, leading investors to rethink their positions on the pound.

Even though the pound has taken a hit, it’s still above the record low it hit after the 2022 mini-budget. Former Bank of England policymaker Martin Weale thinks we should be looking back to 1976 for a better comparison. Back then, the pound’s value dropped so much that the Labour government had to ask the International Monetary Fund for a bailout. Weale says we’re not quite there yet, but it’s definitely a concern for the Chancellor.