Why rising bond yields are rattling Rachel Reeves

Rachel Reeves could be forced to make fresh cuts to public spending at her March ‘spring forecast’ because of rising government borrowing costs. Photograph: Dan Kitwood/Reuters

Rachel Reeves has a bond market headache. After a rise in the government’s borrowing costs, with the 10-year cost of debt hitting the highest level since 2008, the chancellor is in danger of breaking her fiscal rules.

For the past 15 years, western governments have been able to rely on the financial markets for cheap borrowing. After the 2008 financial crisis the world’s most powerful central banks cut interest rates close to zero, while inflation remained low, with the idea to help reboot economic activity.