Troubling, but not Truss-like Chancellor must be careful to avoid risk of a doom loop

Borrowing costs at the highest level since 1998, the pound at a 14-month low and some major UK company shares dropping like a stone.

- Richard Partington

Borrowing costs at the highest level since 1998, the pound at a 14-month low and some major UK company shares dropping like a stone. For a government that had pledged a return to economic stability, it has been a tough start to 2025 for Rachel Reeves.

As the chancellor prepared to fly to China to promote closer economic ties with Beijing, the blow-up in the bond market appeared to ease yesterday after a rough couple of days. But Reeves is still battling a political fire and comparisons to Liz Truss's ill-fated mini-budget.

Conditions in the market for UK government bonds, known as gilts, have been far from helpful for Reeves. The yield - in effect the interest rate - on 10-year gilts reached the highest level since the 2008 financial crisis, driving up government borrowing costs and surpassing the levels reached after Britain's shortest-serving prime minister detonated the bond market. While the situation has steadied, on longer-dated 30-year bonds the yield still remains at the highest level since 1998.