Global bond selloff impacts UK finances, raises bond yields
Traders bearish on sterling after pound hit 14month low
Treasury reassures on stability, but market cautious

LONDON, Jan 10 Reuters Traders39; confidence in the pound has taken its biggest dive this week since the 2022 UK budget crisis, according to the options market, as a global bond selloff added to growing unease over Britain39;s finances and sent bond yields to 16year highs.

The options market shows traders are positioned more bearishly against the pound than at any time since early 2023, as the market was emerging from the wild swings unleashed by thenPrime Minister Liz Truss39; minibudget in September 2022.

This week, 10year gilt yields have risen by a quarter point to a high of 4.925, the most since 2008, echoing a selloff in U.S. Treasuries that has rippled through global bond markets, punishing UK debt harder than most.

The pound is set for a weekly drop of nearly 1, having hit a 14month low of 1.2239.

Rising yields mean British finance minister Rachel Reeves is under pressure to find ways to meet the government39;s fiscal rules, which could complicate the Bank of England39;s task to manage monetary policy.

The Treasury39;s assurance that it has an iron grip on the country39;s finances has returned some stability to UK assets.

But the options market suggested traders were cautious.

Threemonth risk reversals , a play that reflects how much more traders are willing to pay to own options to buy…