![]() ![]() The trigger for Tuesday’s slump in short-dated gilt prices was official data which showed basic wages in the three months to April rose at an annual pace of 7.2% – the highest on record outside periods when the data was distorted by COVID furlough payments.īut it was the latest in a string of releases which have shown persistent strong inflation pressure in Britain, despite weak economic growth, and prompted markets to sharply raise their already-high expectations for BoE rates. “This sell-off is not so much about fiscal stability but about the (interest) rate and inflation environment,” he added. “The doom loop we entered into for pension funds hasn’t happened this time around,” said Jim Leaviss, chief investment officer for public fixed income at fund manager M&G. ![]() ![]() British lenders have jacked up mortgage rates in recent days, and the opposition Labour Party has said it may have to slow down green investment plans if it wins power in national elections expected next year due to higher finance costs.īut while the 2.4 trillion pound ($3.0 trillion) gilt market may be back in the headlines for the first since last autumn – when the ructions destabilised pension funds, forced a Bank of England intervention and ultimately cost Liz Truss her job as prime minister – professional investors see few parallels.ĭay-to-day moves are much smaller, and mostly affect short-dated gilts where investors are used to price swings as they reassess the outlook for inflation and Bank of England interest rates.īy contrast, September and October’s moves were bigger and concentrated on long-dated gilts, some of whose holders were ill-prepared for a sudden drop in value as markets took fright at Truss’s plans for tax cuts that ignored Britain’s established fiscal rulebook. The rapid rise in gilt yields has consequences for the wider economy. The bond’s price recorded its biggest daily fall since October on Tuesday. Two-year gilt yields hit a peak of just over 4.9% in the first minutes of trading on Wednesday, a day after they had pushed past their previous Sept. LONDON (Reuters) – Britain’s government bond market has seen its heaviest sell-off since last autumn’s “mini-budget” crisis, lifting two-year borrowing costs to their highest since July 2008 – but investors say there’s far less reason for panic than last year, and maybe even a bargain. ![]()
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