UK bond market on edge amid political turmoil – business live
Political instability, fears of drawn-out Labour leadership campaign, and possibility of Reform government all blamed for jump in UK borrowing costs
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The UK bond market is bruised this morning after a day of political turbulence drove up Britain’s borrowing costs.
Brits are grappling with their own political shakeups after Nigel Farage scored big in the latest elections. The name Farage resonates in markets as a clearer path toward looser fiscal policy, higher spending and larger deficits, just as investors are already worried about Britain’s debt and inflation outlook.
That combination is pushing investors to demand higher compensation to hold UK government debt, sending the UK 10-year gilt yield back above 5%. That’s the highest level since 1998. The higher the borrowing costs, the less the government can borrow, and the impact on growth would be negative.
Who in Reform is going to run the bond market / spending plan optimisation game? What are they going to do to solve the housing crisis – which isn’t about building 1.5 mm executive homes in the next 3 years but about supplying decent social and affordable housing for young people to have housing security and start family formation? Who in Reform will be looking at the welfare budget (which now pays £39 bln (2/3 of the defence budget) on housing benefits? Who in Reform will be making the calls on the NHS, Defence and, yes, the greatest immediate challenge to England since the Armada hove into view – filling potholes?
Reform has clear intent to govern. Over the next three years – how will they persuade the bond market they can?
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