UK long-term borrowing costs could halve chancellor’s budget headroom

John Healey will present his first budget on 28 October. Photograph: Stefan Rousseau/AFP/Getty Images

The chancellor’s headroom against Labour’s fiscal rules could be almost halved at his first budget if the current global bond sell-off persists into the autumn, economists say.

The UK’s long-term borrowing costs jumped to their highest level since early 1998 on Tuesday as investors dumped government bonds, betting on higher inflation.