HOW US TREASURY BONDS AFFECT INTEREST RATES IN THE UK
US treasury bonds are debt securities issued by the US government. They influence the interest rates of other countries, including the UK, in two ways:
Exchange rate: When the US raises its interest rate, it makes US bonds more attractive to investors, who demand more US dollars to buy them. This increases the value of the US dollar relative to the British pound, which affects UK inflation and growth. The UK may also raise its interest rate to keep the pound stable.
Global bond market: When the US raises its interest rate, it reduces the demand for US bonds, which lowers their price and raises their yield (the annual return). Since US bonds are a benchmark for global bonds, their higher yield can also push up the yields of UK bonds, which means higher borrowing costs for the UK government and other borrowers.