The cost of Government borrowing leapt higher after the US economy added an unexpectedly strong number of jobs at the end of last year.
Bond markets slumped, sending the cost of borrowing higher, as American employers added a surprisingly strong 216,000 jobs in December in a sign of continued economic strength.
The surprisingly high number - well above the 160,000 estimated by some economists - dampened market expectations of swift interest rate cuts this year.
The yield on the benchmark 10-year UK gilt - the return the Government promises to pay buyers of its debt - rose to 3.8pc in the largest move higher among major European economies.
Meanwhile, the German bund yield was on track for its biggest weekly rise since early July.
Money markets were no longer pricing in an interest rate cut by the Bank of England in May, as traders slashed bets on a March cut by the US Federal Reserve to 50-50.
Seema Shah, chief global strategist at Principal Asset Management said: “Jobs growth remains as resilient as ever, validating growing scepticism that the economy will be ready for policy rate cuts as early as March.”
Neil Birrell, chief investment officer at Premier Miton, added: “With average earnings stronger than expected as well, it may be that market hopes for interest rate cuts are a bit too far from reality at the moment, and we will see expectations reined in.
“The consequences for bonds in particular could be negative in the short term.”
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2024-01-05 18:02:00Z
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