Sterling, British gilts sell off as spotlight turns to UK finances

LONDON, Sept 2 (Reuters) - Britain's 30-year borrowing costs rose to their highest levels since 1998 while sterling fell almost 1% on Tuesday, highlighting growing investor anxiety about the UK's ability to get its finances under control.

Thirty-year gilt yields GB30YT=RR touched a peak of 5.69%, up five basis points on the day, their highest since May 1998.

That put pressure on sterling, which was last down 0.9% on the day at $1.34 and 0.5% softer on the euro at 86.85 pence per euro GBP=, EURGBP=

Finance minister Rachel Reeves is expected to raise taxes in her autumn budget in order to remain on course for her fiscal targets, potentially adding to the challenge of speeding up the economy.

Britain's borrowing costs have also faced upward pressure from selling in other big bond markets but Tuesday's selling in both sterling and gilts suggest concern was focused on the UK's weak fiscal position on Tuesday.

"While a repricing of Bank of England expectations had helped sterling last month, the UK is going to be venerable to fiscal risks as the Autumn budget approaches, which is likely to remain a headwind for sterling," said Jane Foley, head of FX strategy at Rabobank