The value of the pound has sunk – as the cost of 30-year government borrowing reached a high last seen in 1998.

The so-called spot rate saw one pound buy $1.336 on Tuesday, a low last seen in early August, and down from $1.353 earlier in the day.

Despite the dip, it’s still higher than the vast majority of the past year: in early September 2024, a pound bought $1.31.

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The decline, however, means sterling is on course for the biggest one-day drop since April, when Donald Trump’s announcement of country-specific tariffs spooked markets.

The drop was similarly steep against the euro, with a pound momentarily buying €1.1486, a low not seen since November 2023, nearly two years ago. It’s also a fall from €1.1586 earlier in the trading session.

Before the so-called liberation day announcement, £1 equalled nearly €1.19.

It comes as the yield – the interest rate demanded by investors – on 30-year government bonds – loans taken by the state – hit 5.72%, the highest rate this century.

Why?

Yields are rising across the globe in the face of weak economic growth and the US trade war.

Investors are also concerned about UK government finances as Chancellor Rachel Reeves battles to stick to her fiscal rules to bring down debt and balance the budget.

High inflation and increased public debt from the pandemic have left a deficit between state spending and income.

There have been high-profile government U-turns on winter fuel payments and welfare spending cuts that have meant the chancellor has to look elsewhere to meet her self-imposed fiscal rules.

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More expensive interest payments from rising bond yields have meant the country is stuck in a cycle of rising debt.

Today’s rises to the cost of government borrowing could not have come at a worse time for the public finances.

While a £14bn sale of new 10-year government debt – a record sum – was completed, it was achieved at the highest yield since 2008.

Lale Akoner, global market analyst at investment platform eToro, said of the auction: “For the government, this creates a paradox – market confidence in UK debt is robust, but financing that debt is increasingly expensive, constraining budget flexibility and raising the stakes for fiscal discipline ahead of the autumn budget.”

The yield on 10-year gilts, as they are known in the UK, later rose to its highest since January at 4.825%, up on the day but in line with their transatlantic equivalent, US Treasuries.

The global bond sell-off was also being reflected on stock markets.

The Dow Jones Industrial Average and tech-focused Nasdaq were both down by more than 1% at the open on Wall St.

In Europe, Germany’s DAX was 2% lower while the FTSE 100 was just 0.6% down as it is less exposed to declines in technology stocks which have accounted for much of the value growth seen over the summer.

The flight from risk also saw the spot price of gold, traditionally a safe haven for investors in times of uncertainty, briefly climb to a new record high of $3,578.40 per ounce.

Nestle shares opened down more than 2.5% after the maker of Nescafe, Cheerios, KitKat, and Rolos dismissed its chief executive after an investigation into an undisclosed romantic relationship with an employee.

On Monday night, Nestle announced that the immediate dismissal of Laurent Freixe, effective immediately, following the investigation into the relationship, with a direct employee, which had breached the company’s code of business conduct.

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The replacement for Mr Freixe was announced as being Philipp Navratil, a long-time Nestle executive and former head of Nespresso, the brand of coffee machines owned by Nestle.

It’s the second CEO departure from the Swiss food giant in a year.

Mr Freixe’s predecessor, Mark Schneider, was suddenly removed a year ago, and in June, the longstanding chair, Paul Bulcke, announced he would step down in 2026.

No further detail on the relationship was released by the company, nor was additional information on whom the person Mr Freixe had the relationship with.

Mr Bulcke, who led the investigation, said: “This was a necessary decision. Nestle’s values and governance are strong foundations of our company. I thank Laurent for his years of service at Nestle.”

Mr Freixe had been with Nestle since 1986, holding roles around the world, including chief executive of Zone Latin America.

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Nestle’s shares, a bedrock of the Swiss stock exchange, lost almost a third of their value over the past five years, performing worse than other European stocks.

The appointment of Mr Freixe’s had failed to halt the slide, and the company’s shares shed 17% during his leadership, disappointing investors.

The owner of the Cote restaurant chain is exploring the option of injecting new funding into the business and retaining control after two months of talks with potential buyers.

Sky News has learnt that Partners Group, the Swiss-based private equity firm, is seriously considering providing millions of pounds of new capital to finance a turnaround plan which would be likely to involve the closure of loss-making sites.

Partners Group hired Interpath Advisory during the summer to sound out prospective bidders.

A number of those discussions are said to be ongoing.

Cote was bought out of administration by Partners Group in the autumn of 2020 in a deal reportedly worth £55m.

The chain trades from about 70 restaurants, down from close to 100 shortly before it collapsed into insolvency five years ago.

Sources close to the sale process said that Interpath had been marketing the company based on last year’s turnover of over £150m.

Roughly 60 of the sites are said to be profitable, implying there could be scope for further closures.

The sale process comes at a time when hospitality venue operators continue to face severe financial pressures, with the industry’s leading trade body recently warning of a further jobs bloodbath in the months ahead.

“If we carry on with these trends and the situation doesn’t improve – and clearly Rachel Reeves’s statements are giving a signal to consumers that it is not going to get better any time soon – then I would see this accelerating,” said Kate Nicholls, chair of UK Hospitality.

“Unless there is a change of tack by the government, we are looking at 150,000-200,000 fewer workers in hospitality during the first full year of [employer national insurance contribution] changes.”

Partners Group and Interpath declined to comment.