The cost of Government borrowing has jumped after two shock interest-rate rises this week delivered a reality check about the fight against inflation. 

Two-year UK gilt yields, which are more sensitive to interest rates, climbed nine basis points to 4.55pc after the Bank of Canada joined the Reserve Bank of Australia in surprising markets with more rate hikes. 

The bond’s yields - the return the Government must offer to buyers of its debt - have climbed 28 basis points in the last week, while the yield 10-year UK gilts have risen 13 points in the last week.

Global bonds have been hit, with shorter-maturity US Treasury yields close to their highest since March.

Their Australian equivalents have jumped to levels last seen more than a decade ago. 

It comes ahead of a key US Federal Reserve decision at its meeting on June 13 to 14, where traders are expecting the central bank of the world’s largest economy to pause its long-running programme of interest rate rises.

Colin Graham, head of multi-asset strategies at Robeco, said: “The Reserve Bank of Australia defied economist predictions to increase the cash rate again this week, which may put more pressure on the European Central Bank, US Federal Reserve, Bank of Japan and Bank of England. 

“Expectations for July have now shifted from an expected cut to an expected rise.”

Diana Iovanel, economist at Capital Economics, said: “With inflation having proved more stubborn than we’d thought, we now think the central bank will keep its policy rate higher for longer than we had previously projected.”

Read the latest updates below.