UK borrowing costs jump, stocks slide as budget speculation mounts

British government bond yields rose sharply on Friday following reports Finance Minister Rachel Reeves is no longer planning to raise income tax rates in the Autumn Budget later this month.

The yield on the benchmark 10-year gilt rose around 12 basis points in early trade, before paring gains to trade at 4.498%. Yields and prices move inversely to one another.

The moves came as investors reacted to a report from the Financial Times of an income tax U-turn. The Treasury was not immediately available to comment when contacted by CNBC on Friday morning.

U.K. stocks were also lower. The FTSE 100 index shed over 1% at 8:54 a.m. in London (3:54 a.m. ET), with Lloyds , Natwest, and Barclays banks occupying the bottom of the index, each losing more than 2.8%.