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U.K. borrowing costs hit highest level since before Brexit vote

Published 14/11/2016, 09:25
© Reuters.  U.K. borrowing costs hit highest level since before Brexit vote
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Investing.com - The 10-year U.K. government bond yield rose to its highest level since May on Monday as a selloff in Treasuries continued amid a surge in inflation expectations.

The yield on UK 10-Year government bonds rose to 1.45% from 1.36% late Friday, hitting the highest level since May, shortly before the June Brexit vote.

Elsewhere in Europe, yields on Germany 10-Year Bunds, the euro zone benchmark, rose to 0.36%, the strongest since late-January, while French 10-Year bond yields rose to 0.85%.

Yields rise when bond prices fall as investors demand a higher rate of return for holding the debt.

The selloff in global bonds, which last week wiped $1 trillion off bond prices, continued as investors reassessed the implications of a Trump administration.

Investors expect that Trump's campaign pledges to increase fiscal spending, cut taxes and loosen financial regulation will prompt the Federal Reserve to hike interest rates as economic growth and inflation pick up.

Investors are currently pricing an 85.8% chance of a rate hike at the Fed's December meeting; according to federal funds futures tracked Investing.com's Fed Rate Monitor Tool.

If interest rates rise, the market value, or price, of bonds has to fall to adjust, lifting yields in the process.

The U.S. 10-Year Treasury yield jumped to 2.23%, a level not seen since January 6, from 2.13% on Thursday. The U.S. bond market was closed on Friday for Veterans Day.

The yield on the 10-year note was below 1.8% in the days leading up to the election.

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