Markets conclude higher level of public spending could lead to higher growth and inflation, making cuts in Bank of England rate less likely

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UK government borrowing costs have risen to their highest level this year as City investors bet Rachel Reeves’s budget would lead the Bank of England to adopt a more cautious approach to cutting interest rates.

The yield – in effect the interest rate – on benchmark 10-year UK government bonds rose by more than 0.15 percentage points to trade above 4.5% on Thursday, before falling back slightly, as financial markets reacted to Labour’s first budget in 14 years.