Bond investors give budget the thumbs up
By the end of the day, UK bonds had recovered more ground as investors welcomed the UK’s new fiscal outlook.
The news that the chancellar has doubled her budget headroom to over £20bn helped to spark a rally in gilts today.
The 10-year UK bond yield fell by 11 basis points, to 4.42%, while 30-year yields fell by 11bps.
Deutsche Bank analysts have spotted that this was the best Budget day for UK government debt, compared to German and American debt, in almost 20 years!
They report:
At first glance, the gilt market likes what it heard from the Chancellor today.
In fact, benchmarked relative to Bunds and US Treasuries, at the time of writing today marks the largest fall in 10y gilt yields on the day of a UK budget or major fiscal statement since 2006.
Not everyone is happy, though – several gambling firms have warned that the taxes announxed today will hit their profits, and lead to job losses in the sector.
Danni Hewson, AJ Bell head of financial analysis, says:
“Investors were quick to cotton onto the fact that they wouldn’t have to wait for the chancellor to get to her feet to find out exactly what her Budget had in store. Within minutes of the OBR publishing its fiscal outlook early, markets were passing their real-time assessment of what they were reading – weak growth, chunky tax and spend measures, but the much-vaunted fiscal prudence intact.
“There was a brief rally in gilts thanks to better-than-expected fiscal headroom, with yields dropping and prices rising on short and long-term UK government bonds before moving back. The lack of a gilt market sell-off was reassuring, and overall the contents of the Budget struck a broadly positive tone with investors once they’d had time to digest the key facts.
Our Politics Liveblog (where I’ve been moonlighting this afternoon) has all the action:
Goodnight! GW
Here’s everything important that happened during a madcap budget day:
