Pound falls further as borrowing costs rise again

The pound has dropped to its lowest value against the dollar since November 2023 while government borrowing costs have continued to rise.

The pound fell to $1.21 on Monday morning as the recent sell-off continued.

Meanwhile, the rate at which the government can borrow money - known as the yield - rose again, hitting its highest level since 2008 by one measure.

Borrowing costs for many countries are rising across the world, though some have said decisions made in the Budget have made the UK particularly vulnerable.

Governments generally borrow money by selling bonds to big investors, such as pension funds. UK government bonds are known as gilts.

The yield on the 10-year gilt - the interest rate at which the government pays back a decade-long loan to investors - has risen to 4.89%, its highest level in nearly two decades.

The 30-year gilt rose to 5.5%, its highest level in 27 years.

Government debt costs in Germany, France, Spain and Italy have also all risen as markets opened on Monday morning.

Some experts say investors are reacting to the re-election of former US President Donald Trump and his talk of tariffs.

There is concern this will lead to inflation being more persistent than previously thought, and therefore interest rates will not come down as quickly as expected, both in the US and elsewhere.

Strong US jobs data released on Friday also added to expectations that US rates will stay higher for longer, and this has helped to strengthen the value of the dollar against other currencies.

However, Emma Wall, head of platform investors at Hargreaves Lansdown, said the UK's problems were not purely caused by global issues, arguing that measures announced in the Budget have stoked inflation.

"If you can get inflation under control, you will see interest rates come down in the UK," she added.