Government bond prices fell drastically following a lack of confidence in political leadership, directly influencing the pound's value. The 10-year gilt surged by 22 basis points to around 4.68%, marking the largest single-day increase since October 2022. Mid-cap stocks also declined. Commentary from market analysts indicates a significant reevaluation of fiscal policy is underway, with concerns about public borrowing rising. Key political figures displayed signs of distress, highlighting the political ramifications of economic decisions and market reactions.
(The welfare U-turn) is signalling that the Labour Party is a lot less concerned about what the gilt market thinks. I would have thought it was seared into politicians' memories what happened to Liz Truss.
Clearly the market is revaluating the outlook for fiscal policy and hence the significant steepening in the gilt curve. The vote in the House of Commons gives reason to think again about the likely outlook for public borrowing.
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