British Chancellor of the Exchequer Rachel Reeves poses with a red budget box outside her office on October 30, 2024 in Downing Street, London, England.
Maja Smiejkowska | Maja Smiejkowska Reuters
LONDON – British borrowing costs hit their highest level since Labor took office on Wednesday after Finance Minister Rachel Reeves unveiled an interest rate policy. massive tax increase plan in her first budget.
The output is 10-Year UK Government Bond In the hours after Reeves made the announcement at 12:30 p.m., the yuan surged 7 basis points, its highest level since she took office in early July. As of 4:00pm UK time (12:00pm ET), the yield had cooled, rising 3 basis points to 4.35%.
The output is 2-year bondUK gilts, known as “bonds” in the UK, rose 6 basis points to 4.33% after rising 10 basis points.
Yields move in opposite directions to prices, so higher yields are often seen as a sign of greater perceived risk by investors.
The budget contains tax increases worth 40 billion pounds ($52 billion) to plug holes in public finances – Reeves promised a surplus in day-to-day spending – and allow for more investment in public services.
Treasury alone talk It will increase gilt issuance by 22.2 billion pounds ($28.9 billion) this financial year to 299.9 billion pounds to meet its net financing needs.
Compared with several rounds of turmoil in recent years, the Phnom Penh market has remained relatively stable.
In September 2022, after former Conservative Prime Minister Liz Truss announced Billions of dollars in unfunded tax cuts. Market volatility is so severe that it threatens the stability of UK pension funds and calls for Bank of England emergency interventionforcing Truss to reverse most of the changes and resign within weeks.
Analysts had said ahead of the October 2024 budget that such volatility was unlikely to be repeated for a variety of reasons. A number of key policies have been announced, including that any increase in borrowing will fund public investment.
On top of that, UK inflation has fallen sharply since Truss’s time, with the latest inflation rate at 1.7%, compared with 10.1% during Truss’s tenure as prime minister.
Joe Maher, assistant economist at Capital Economics, said: “We suspect that given that inflation has fallen back to the Bank of England’s 2% inflation target and interest rates are likely to be trending lower, investors may now Be more tolerant of looser fiscal policy.
Sanjay Raja, chief UK economist at Deutsche Bank Research, said Reeves’ budget “brings about a significant shift in fiscal policy”, with spending on public services set to rise by £50bn by the end of the decade. Investment spending will increase by a further £10 billion.
“Ultimately, markets will have to deal with increased borrowing… At the moment, markets remain broadly optimistic about the chancellor’s plans. But today’s budget suggests there will be more gilt issuance than previously expected,” LaLar said. Jia said.
“Similarly, while the Chancellor has reset the fiscal framework today, space remains an issue… With public spending pressures likely to increase from now on, the Chancellor will be walking a tightrope between more tax increases and/or tax cuts. .
Correction: The headline has been updated to reflect the government’s tax increase in Wednesday’s budget.
