UK 10-year gilt yields rise after German parties propose big spending plan

LONDON, March 5 (Reuters) - British government borrowing costs climbed on Wednesday following a selloff in long-dated German bonds after the parties aiming to form the country's new government said they wanted to relax debt rules to allow for higher spending.

The two parties likely to lead Germany, Europe's largest economy, on Tuesday announced proposals for a 500 billion euro infrastructure fund and a reform of its borrowing rules to boost spending on defence.

Ten-year British gilt yields GB10YT=RR peaked at their highest level since January 16 at 0815 GMT, up about 15 bps on the day at 4.708%, but before falling back to stand around 10 bps higher at 0927 GMT.

Germany's 10-year yield EU10YT=RR is on track for its biggest daily rise since March 2020, up 20 bps on the day on Wednesday, while the 30-year yield EU30YT=RR at one point was up by the most since October 1998.

Interest rate futures pointed to about 54 basis points of reductions to the Bank of England's Bank Rate by December this year, down from 61 bps on Tuesday which represented a full pricing of just over 2 quarter-point rate cuts.

Global markets were also bracing for a hit to economic growth and potentially higher inflation after U.S. President Donald Trump announced more trade tariffs to come next month in a speech on Tuesday.

New 25% tariffs on imports from Canada and Mexico took effect on Tuesday, along with fresh duties on Chinese goods. Trump, in a speech to Congress, said further tariffs would follow on April 2, including reciprocal tariffs on other countries.