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A quick check-in on gilt markets: after a bit of turbulence last week following the UK budget, trading appears to have settled.
The yield on UK benchmark 10-year bonds (aka 10-year gilts) is at 4.48%, up from 4.45% on Friday. That suggests that some investors have sold UK government debt today, but a move of three basis points (0.03 percentage points) is not particularly notable in bond market terms. Yields move inversely to prices.
It is customary for the BoE to brush off changes in fiscal policy, but it would have to be tone deaf to do that this time around. Monetary policymakers will surely have to take notice of the Office for Budget Responsibility explicitly raising its interest rate assumptions 25 basis points above market pricing to account for the likely market reaction to the change in the fiscal stance.
By raising the 10-year gilt yield from 4.32% at the pre-budget close to 4.46%, financial markets have done as they were told. It is time for the BoE to follow.
The new government in the UK said they would stimulate growth, but they’re making it more expensive [to fly]. The government missed a huge opportunity in cost [going up].
I think it’ll have a big impact on the regions.
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