Can Rachel Reeves calm the markets?

The more investors dig into Labour’s first Budget, the less they seem to like it. After the Office for Budget Responsibility published its assessment of the Chancellor’s measures yesterday afternoon, some immediate (and expected) volatility set in. But rather than settling down, market jitters seem to have worsened today, as a gilt sell-off saw government borrowing costs hit their highest level in 2024 this afternoon, with the 10-year gilt yield reaching 4.52 per cent and the five-year gilt yield reaching 4.41 per cent.

So far the situation is manageable for the government – but is a strong indication that the markets are not quite as on-side with their plans for spending as had been suggested. It seems not even the staggering £40 billion worth of tax hikes have not balanced out the £160 billion worth of additional borrowing Rachel Reeves has planned over the course of this Parliament.