Money blog: Santander’s value has dropped by billions | Money news

Sarah Taaffe-Maguire, business reporter

Talking about the cost of government borrowing is difficult, and will soon become even more difficult.

The interest rate the government must pay on a key way of raising money – issuing government bonds to investors – has mostly risen over the past six weeks.

Bonds are issued for a specified period of time, ranging from three months to 50 years, and act as a type of loan. Markets determine interest rates, so what investors charge can tell us how they receive political announcements and economic data.

Higher borrowing rates make debt more expensive and can deter governments from funding investments in public services.

There are many factors that determine the interest rate, known as the yield, on British government bonds called gold bonds. What exactly influences profitability is a matter of debate.

Since last week, as reports emerged that Chancellor Rachel Reeves was imminently breaking her spending rules, there has been a sharp jump in the benchmark 10-year gold bond yield, a jump that was exceeded for the second time this morning.

This could be due to concerns about Ms Reeves’ additional borrowings, which could amount to billions. The yield is now the highest since Labor came to power on July 4 at 4.282%.

Or perhaps the UK is being affected by the same forces as the US, where the 10-year yield also rose sharply this month to 4.3%.

The polls are tied to the US presidential election, which means the possible introduction of inflationary policies by Donald Trump.

The UK 10-year yield is in line with the US 10-year yield as there is speculation that the Bank of England will follow the US central bank, the Federal Reserve, in cutting rates.

Tomorrow, as the US election approaches, it will be even more difficult to clearly determine how UK bond yields will react to the Budget tomorrow.

It is important to note that at the same time Ms Reeves stands in the House of Commons, the US – the world’s largest economy – will announce economic growth data.

Meanwhile, a slight easing in tensions between Iran and Israel kept oil prices below $72 a barrel for the second day in a row.

High rewards for shareholders of Europe’s largest bank HSBC have sent its share price to a six-year high. This is the biggest rise in the FTSE 100 index of the most valuable companies on the London Stock Exchange. The overall index was up 0.36%, but the larger, UK-focused FTSE 250 index was down 0.39%.

Sterling fell close to recent highs against the euro and dollar, although the currencies tend to gain ground on higher bond yields. A pound can buy 1.1997 euros and 1.2982 dollars.