UK government bond yields highest in 16 years
Higher yields add to worries over UK government finances
Finance ministry says it has 39;iron grip39; on public purse

LONDON, Jan 9 Reuters The pound hit its lowest since late 2023 on Thursday, under pressure from a selloff in global bonds that has driven the UK government39;s borrowing costs to their highest in over 16 years, which has reignited concern about Britain39;s finances.

Sterling was last down 0.5 at 1.2305, having fallen by as much as 1.6 earlier to its lowest since November 2023, while the cost of hedging against bigger price swings over the coming month jumped to its highest since the March 2023 banking crisis .

Global bond yields have soared this week on the back of concern about rising inflation, reduced chances of a drop in interest rates, uncertainty over how U.S. Presidentelect Donald Trump will conduct foreign or economic policy and the prospect of trillions of dollars in extra debt.

The UK market has been hit particularly hard. Benchmark 10year gilt yields have spiked by a quarter point this week alone to their highest since 2008, as confidence in Britain39;s fiscal outlook deteriorates. By the afternoon in London on Thursday, some of the selling pressure had ebbed, leaving yields unchanged on the day around 4.81.

Finance minister Rachel Reeves is facing her first major test, as turmoil in the bond market could force her to cut future spending.

Ordinarily, higher gilt yields would support the…