The global bond selloff deepened this morning, as UK borrowing costs hit multi-decade highs again amid investor anxiety over inflation, interest rates and debt. 

The yield on 10-year UK bonds, known as gilts, rose to its highest since June 2008, up 4 basis points to 5.268 per cent this morning. The 30-year yield was largely unchanged from Tuesday, when it surged to a 28-year high. 

Oil prices also climbed, with Brent crude surging above $94 a barrel, amid a flare-up in attacks between the US and Iran in the Middle East.

Yields on US ten-year Treasury bonds – the world’s benchmark assets – climbed to nearly 4.8 per cent, the highest level in a year and a half. 

Meanwhile, Germany’s ten-year yields climbed above 3.37 per cent, the highest since 2011, after official figures showed eurozone inflation topped 3 per cent in August, cementing the likelihood of a rate rise by the European Central Bank this month.

In Japan – where borrowing costs have been kept low for years by massive central bank debt purchases – ten-year yields crossed the 3 per cent threshold for the first time in three decades.

A previous bond rout last month was only halted when US Treasury Secretary Scott Bessent stepped in to inject billions of dollars into the market.

However, some experts believe the intervention will do little to alter investors’ fundamental concerns about the state of US public finances, at a time when its debt is running above $40 trillion.

Markets have also been worried about stubborn inflation and have been uncertain about the commitment of the US Federal Reserve to tackle it under the leadership of new chairman Kevin Warsh.

A speech by Warsh last week seemed designed to underline his commitment to the Fed’s goal of bringing down inflation.

Yet markets seem to have responded with more jitters, fearing this will mean a US interest rate hike is more likely this month. 

Oliver Faizallah, head of fixed income research at financial firm Raymond James, said the recent bond market moves had ‘overwhelmingly been driven’ by Warsh’s statements.

‘We received no new macroeconomic data points. However, a firmly hawkish tone from Warsh was enough to move markets,’ he said.

Kallum Pickering, chief economist at City broker Peel Hunt, said UK yields were rising faster than elsewhere.

He added: ‘There is no room for handouts in the upcoming Budget. Anyone thinking otherwise is mistaken. 

'Until a British government musters the courage to cut spending, raise taxes and deregulate to boost supply, bond markets will crowd out genuine economic progress.’