UK long-term borrowing costs have hit their highest level since 1998.

The unwanted milestone for the Treasury’s coffers was reached ahead of an auction of 30-year bonds, known as gilts, this morning.

The yield – the effective interest rate demanded by investors to hold UK public debt – peaked at 5.21%.

At that level, it is even above the yield seen in the wake of the mini-budget backlash of 2022 when financial markets baulked at the Truss government’s growth agenda which contained no independent scrutiny from the Office for Budget Responsibility.

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The premium is up, market analysts say, because of growing concerns the Bank of England will struggle to cut interest rates this year.

Just two cuts are currently priced in for 2025 as investors fear policymakers’ hands could be tied by a growing threat of stagflation.

The jargon essentially covers a scenario when an economy is flatlining at a time of rising unemployment and inflation.

Growth has ground to a halt, official data and private surveys have shown, since the second half of last year.

Critics of the government have accused Sir Keir Starmer and his chancellor, Rachel Reeves, of talking down the economy since taking office in July amid their claims of needing to fix a “£22bn black hole” in the public finances.

Both warned of a tough budget ahead. That first fiscal statement put businesses and the wealthy on the hook for £40bn of tax rises.

Corporate lobby groups have since warned of a hit to investment, pay growth and jobs to help offset the additional costs.

At the same time, consumer spending has remained constrained amid stubborn price growth elements in the economy.

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Higher borrowing costs also reflect a rising risk premium globally linked to the looming return of Donald Trump as US president and his threats of universal trade tariffs.

The higher borrowing bill will pose a problem for Ms Reeves as she seeks to borrow more to finance higher public investment and spending.

Tuesday’s auction saw the Debt Management Office sell £2.25bn of 30-year gilts to investors at an average yield of 5.198%.

It was the highest yield for a 30-year gilt since its first auction in May 1998, Refinitiv data showed.

This extra borrowing could mean Ms Reeves is at risk of breaking the spending rules she created for herself, to bring down debt, and so she may have less money to spend, analysts at Capital Economics said.

“There is a significant chance that the Office for Budget Responsibility (OBR) will judge that the Chancellor Rachel Reeves is on course to miss her main fiscal rule when it revises its forecasts on 26 March. To maintain fiscal credibility, this may mean that Ms Reeves is forced to tighten fiscal policy further,” said Ruth Gregory, the deputy chief UK economist at Capital Economics.

President-elect Donald Trump has asked a New York court to throw out his hush money conviction before Friday’s scheduled sentencing.

It has been set for 10 January, just 10 days before the presidential inauguration.

Trump was found guilty in May of 34 counts of falsifying business records, relating to an alleged scheme to hide a hush money payment to adult actress Stormy Daniels in the last weeks of his first campaign in 2016.

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Trump’s spokesperson has called the case “lawless” and a “witch hunt”.

Lawyers for the 78-year-old have previously pushed to dismiss the verdict and throw out the case on presidential immunity grounds, due to his impending return to the White House.

Their request to a state appeals court represents a last-ditch effort by Trump to block a lower court ruling on Monday to proceed with the sentencing.

In the ruling Judge Juan Merchan rejected a request from Trump’s lawyers to delay the sentencing while they appealed two of his previous rulings upholding the Manhattan jury’s guilty verdict on 34 felony counts of falsifying records in May.

Scheduling Trump’s sentencing for Friday, Judge Merchan said he was not inclined to send Trump to jail.

He said a sentence of unconditional discharge, which essentially puts a judgment of guilt on his record without a fine or probation, would be the most practical approach ahead of Trump’s inauguration.

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On Monday, Trump’s lawyers cited both presidential immunity and the demands of the impending inauguration, saying Judge Merchan’s intention not to penalise the president-elect was “of no moment”.

“Presidential immunity violations cannot be ignored in favour of a rushed pre-inauguration sentencing,” the lawyers said in a court filing.

Trump has always denied a sexual encounter with Daniels, but was convicted of falsifying business records over a $130,000 (£102,000) payment to allegedly keep her from publicising claims in the lead-up to the 2016 election.

The case made Trump the first US president to be charged with and convicted of a crime.

His lawyers have made two unsuccessful attempts to have the case dismissed, which they now say they plan to appeal.