Closing post.
Time to recap.
The turmoil in the UK bond market has calmed today, as the government insisted there was no need to intervene to stem rising borrowing costs.
After an early jump, UK bond yields have fallen back, and are only slightly above last night’s levels, meaning the country’s borrowing costs are little changed today/
The pound, which hit 14-month low in early trading, has recovered some ground – and is down two-thirds of a cent today at $1.23.
The recovery came after chief secretary to the Treasury, Darren Jones, told MPs that the government remained fully committed to its fiscal rules.
He said:
“In recent months, moves in financial markets have been largely driven by data and geopolitical events, which is to be expected as markets adjust to new information.
“UK gilt markets continue to function in an orderly way and underlying demand for the UK’s debt remains strong.”
Jones was answering an urgent question in the House of Commons, called after the UK’s 10-year borrowing costs hit the highest since 2008, while 30-year gilt yields climbed to a 26-year high.
Bank of England deputy governor Sarah Breeden also struck a calming tone tonight, telling an audience at the University of Edinburgh Business School that moves in the gilr market had been “orderly”.
Economists have suggested that the recent rise in borrowing costs has all-but-eaten away the headroom left by chancellor Rachel Reeves to hit her fiscal goals.
Some have suggested she could cut spending, or potentially raise some taxes, in the spring statement scheduled for March.
The BoE’s Sarah Breeden has also said that direction of travel on UK interest rates is clear – downwards.
Bank rate will be coming down. The question is the pace at which it comes down. And we will only know that as the data evolves and we get a clearer read on the nature of the shocks that we are seeing.”
