UK’s borrowing costs rise as Reeves’s budget prompts fears of slower interest rate cuts

Rachel Reeves and Keir Starmer visiting a hospital in the West Midlands. Labour’s budget may require a higher than forecast issuance of government bonds. Photograph: Darren Staples/Reuters

UK government borrowing costs have risen to their highest level this year as City investors bet Rachel Reeves’s budget would lead the Bank of England to adopt a more cautious approach to cutting interest rates.

The yield – in effect the interest rate – on benchmark 10-year UK government bonds rose by more than 0.15 percentage points to trade above 4.5% on Thursday, before falling back slightly, as financial markets reacted to Labour’s first budget in 14 years.