LONDON, Sept 4 (Reuters) - Bank of England Governor Andrew Bailey said on Friday that weak productivity and shocks such as COVID-19 were behind a climb in public debt across advanced economies, which in turn was pushing up borrowing costs.
"There are very, very substantial challenges at the moment, structural challenges," Bailey said at a conference hosted by the London School of Economics' Trium MBA programme.
Ageing populations and a desire for higher defence spending were also important factors,
he added.
"That is, I think, relevant to thinking about the pressures on bond markets," he added, in response to a question about why investors had recently wanted to receive a higher interest rate on French government debt than that of cosmetics company L'Oreal.
Government bond yields have surged in recent months and earlier this week British 10-year bond yields were their highest in almost 20 years, and longer-dated yields hit their highest since 1998.
Bailey voted with the majority of the Monetary Policy Committee's members to keep interest rates on hold in July as the MPC awaited clearer signs of what the Iran war means for long-term inflation pressures.
Investors in interest rate futures on Friday priced the chance of a quarter-point rate hike at the MPC's next meeting this month at about 10% although that probability rose to more than 60% for the subsequent meeting in November.
(Reporting by David MillikenEditing by William Schomberg)
