Closing post: Bond panic eases as governor calls for calm
Time to wrap up….
UK government borrowing costs have fallen today, as calm returned to the bond markets.
The yield, or interest rate, on Britain’s 30-year bonds has dropped back to 5.6% tonight. Earlier this morning, they traded at a new 27-year high of 5.75%.
The drop should cheer the UK Treasury, as it takes some of the pressure off chancellor Rachel Reeves. However, long-term yields do remain high.
America’s long-term borrowing costs also fell this afternoon, after the 30-year US Treasury yield hit 5% for the first time since July.
Bank of England governor Andrew Bailey told MPs that it was important “not to over-focus” on the 30-year bond rate, after Tuesday’s jump in borrowing cost dominated the headlines yesterday.
Bailey also warned that threats to the US Federal Reserve’s independence are “very serious”.
Asked about President Donald Trump attacks on America’s central bank, he said:
“This is a very serious situation, I am very concerned.”
Bailey also warned the Treasury committee that it was very hard to predict when the Bank might be able to cut interest rates again.
He told MPs:
“There is now considerably more doubt about when and exactly how quickly we can make those further steps.”
Reeves has set the date of the autumn budget at 26 November, meaning investors, businesses and the public must wait more than two months to learn what taxes are rising, and which spending may be cut.
Here’s the rest of today’s business news:
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European markets close higher as bond panic eases
Stock markets across Europe have closed higher, as investors welcome calmer trading in the bond markets after yesterday’s turmoil.
In London, the FTSE 100 blue-chip share index has risen by 61 points, or 0.67%, to 9177 points, recovering most of Tuesday’s 80-point fall.
Dan Coatsworth, investment analyst at AJ Bell, sums up the day:
“The FTSE 100 enjoyed a more settled session after yesterday’s drama that knocked equities off course. Precious metals miner Fresnillo hit a new record intraday high as investors remained hungry for ways to play a rising gold price.
Fresnillo has now delivered more than 200% share price gains so far this year, proof that the UK stock market can put up a good fight against go-go-growth stocks in the US and line investors’ pockets with gold and silver.
In Frankfurt, Germany’s DAX gained 0.5%, while France’s CAC is up almost 1%.
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