Jeremy Hunt set out at the start of the weekend with one goal in mind: that when the gilt markets reopened on Monday, the cost of government borrowing would not surge further. Ideally, it would start to fall.
In this sense, it’s been a successful day for the new Chancellor. The Treasury’s early morning update that a major fiscal announcement was about to be announced saw gilt yields start to drop when markets opened at 8 a.m. After Hunt’s overhaul of the mini-Budget – including the surprising decision to suspend the 1p cut to the basic rate of tax ‘indefinitely’ – they fell even further. After starting the day at almost 4.5 per cent, the five-year gilt yield is ending the day just below 4 per cent. The ten-year gilt yield has fallen, slightly less, from 4.1 per cent to 4 per cent.
Market expectations for peak interest rates has also fallen too, now down to just over 5 per cent, compared to more than 6 per cent that came to be expected after the mini-Budget was announced.
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