The UK sold £4.25 billion of ten-year government bonds at an average yield of 5.38 per cent, the highest since September 1999. Higher borrowing costs add to the pressure on the government ahead of next month’s Budget, as more public money will go towards interest payments and less will be available for other spending.

Bond yields have risen amid global market volatility, higher oil prices and inflation concerns linked to the Iran war, as well as investors’ questions about the government’s spending and borrowing plans. Chancellor John Healey said the government would follow its fiscal rules and tackle high debt and welfare spending, but ten-year gilt yields had already reached their highest level since 2007.