LONDON, Jan 8 (Reuters) - British markets are among the

biggest victims of a global bond selloff that has spilled over

into currencies and stocks this week.

Yields on long-dated British government bonds are at their

highest in decades - putting government finances under pressure

- while sterling is struggling and British domestic stocks are

underperforming.

Britain's Treasury says it will maintain an "iron grip" on

the public finances and Treasury minister Darren Jones told

parliament the UK bond markets "continue to function in an

orderly way."

Here are six charts setting out the market impact.

GILTS DUMPED

Benchmark 10-year government bond yields surged

more than 30 basis points in three days to hit 4.925% on

Thursday, their highest since 2008, although they later fell

back in calmer trading.

There was little obvious trigger for the move, which kicked

off Tuesday and accelerated Wednesday, but Emmanouil Karimalis,

rates strategist at UBS, said Britain's high borrowing levels

and the Bank of England's persistent concerns about inflation

were factors.

He noted Britain's government is borrowing roughly 20

billion pounds ($24.55 billion) more in the first quarter than

last year.

That represents a front-loading of the roughly 300 billion

pounds the government is seeking to borrow through gilt markets

this year, the second highest on record behind the pandemic year

of 2020-21.

"It's obviously not a helpful factor, especially for

longer-dated gilts," Karimalis said.

"It seems like the market thinks the UK is somehow losing

fiscal credibility."

STERLING SLUMPS

The pound tumbled to a 14-month low against the

dollar on Thursday on fears surging UK borrowing costs will

force government spending cuts and slow the economy. It has also

lost ground against the euro.

Traders are braced for a wild ride in sterling, and

one-month implied volatility - a measure of expected

price swings - has spiked to its highest since March 2023.

Sterling may replace the euro as traders' currency

of choice to sell short against the dollar, which is surging on

expectations of strong U.S. growth and high interest rates,

Societe Generale chief FX strategist Kit Juckes said.

"We've seen a spike higher in (gilt) yields immediately

prompting lots of debate about whether we are going to need

earlier fiscal tightening, which is going to further slow the

economy."

"That has got volatility picking up because it is a change

of direction (for the pound)."

STOCKS STRUGGLE

The bond selloff has spilled over into stocks too.

"You saw smaller companies in the UK get hit particularly

hard," said Iain Barnes, chief investment officer at Netwealth.

"Anything that's trading off the confidence in the UK market

combined with interest-rate exposures, has really struggled, so

we're avoiding those areas completely."

Britain's midcap FTSE250 index, which includes

consumer, real estate, and financial firms that make a high

proportion of their revenues in Britain, is down over 3% this

week so far, already its biggest weekly drop since August.

In contrast, the more international FTSE100 blue chip index

and the broad European stocks benchmark are both up

around 1%.

Homebuilders, which typically suffer from higher bond yields

as they push up mortgage rates, have fallen over 7% this week.

The macro economic picture is not solely to blame for the

weakness in British stocks though. Shares in big retailers have

been slumping on disappointing Christmas trading updates.

FISCAL PROBLEMS

Market selloffs can pose a challenge for governments at the

best of times. But the bond aspect is increasing the pressure on

Britain's finance minister Rachel Reeves, and could force her to

cut future spending.

The problems in part stem from Reeves' first budget speech

in October, in which she gave herself only a small margin of

error for meeting her target of balancing spending on public

services with tax revenues by the end of the decade.

Higher gilt yields, as well as Britain's sluggish economy,

means Reeves might already be off course.

"The growing likelihood that the Chancellor will miss her

main fiscal rule suggests further spending restraint and/or tax

rises may be unveiled in 2025," said analysts at Capital

Economics.

"That could act as a bigger headwind to economic growth."

($1 = 0.8145 pounds)