"Signs of calm in the bond market will be warmly welcomed in the UK Treasury. The jump in Britain's bond yields risks widening the black hole' which Rachel Reeves is expected to fill in the autumn budget scheduled for 26 November. That could mean either spending cuts or tax rises to persuade the Office for Budget Responsibility that the chancellor is keeping within the fiscal rules."
"Coordination of these policymakers will be key, and we are modestly encouraged by Treasury language subtly shifting to the task of controlling inflation. Saying it though is the easy bit. Making the tough decisions to enable it is far harder. The jury is out on whether the UK government - and its backbenchers - have the backbone, and the Gilt market knows it."
"There is a sense of calm in European and US markets today, reports Kathleen Brooks, research director at XTB, as the recovery in global bond yields on Wednesday helps sentiment. There are signs that the bond market rout could be over. Global government bond sales have been strong this week and have not been impacted by bond market volatility. Added to this, some governments including the UK's are talking once more about public sector spending cuts, which may boost demand for Gilts in the short term."
UK bond yields have risen sharply, risking a larger fiscal gap ahead of the 26 November autumn budget and potentially requiring tax increases or spending cuts to meet fiscal rules. Demonstrating a firm policy stance from fiscal and monetary authorities is necessary to calm gilt yields, and Treasury language has shifted toward emphasising inflation control, though implementing difficult measures remains challenging. Domestic factors, alongside global concerns, have contributed to the UK's ten-year yield being the highest in the G7 since the spring statement. Global markets show some calm; government bond issuance has held up and talk of public spending cuts could boost gilt demand, though risks persist.
Read at www.theguardian.com
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