Uncertainty Roils British Bond Market Amid Political Upheaval
British government bonds see turbulence amid speculations over finance minister Rachel Reeves' future. Long-term yield rates drop slightly after a significant spike, reflecting investor concerns over fiscal sustainability. Markets remain jittery despite reassurances of economic stability amid potential opposition to spending cuts.
On Thursday, long-dated British government bonds partially rebounded from significant losses triggered by doubts concerning Finance Minister Rachel Reeves' future. Despite minor recovery, the bonds continued to trade lower than earlier in the week.
The 20-year gilt yield dipped by 8 basis points in early trade, with other gilts experiencing similar shifts across various maturities. While British bonds performed better than other major markets, Wednesday's activity marked the most substantial yield spike since October 2022, coinciding with former Prime Minister Liz Truss's administration. Reeves's emotional parliamentary appearance raised fresh anxieties about the management of the UK's public finances.
Long-dated gilts, more indicative of fiscal sustainability concerns than shorter-term debt, are now at levels seen only a month ago, contrasting sharply with the records set during Truss's period. Investors are on edge due to the considerable gilt movements that contradict the government's economic stability promises. Concerns linger about the government potentially losing control over public finances in the face of opposition to planned spending cuts.
(With inputs from agencies.)
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