The Bank of England established the City of London on October 8, 2024 in London, England.
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LONDON – British bond yields surged Thursday after the ruling Labor Party unveiled a new policy. Across-the-board tax hikes and increased borrowing.
At 2:13 pm London time, the 2-year UK government bond yield rose 18 basis points after briefly exceeding 4.5% for the first time since Labor came to power in early July. The 10-year Treasury yield jumped 15 basis points to 4.497%.
Yields were already rising on Wednesday, shortly after Finance Minister Rachel Reeves announced a budget that contained tax rises worth 40 billion pounds ($52 billion) and promised Significant increase in borrowing in the coming years.
Yields move in opposite directions to prices.
“What’s most striking is how much borrowing is expected to rise over the next few years,” ING analysts said in a note Wednesday on rising yields.
“For some time we have argued that the government had no choice but to increase real spending. But the amount delivered is certainly higher than many expected just a few weeks ago.”
Analysts cited forecasts by the independent Office for Budget Responsibility that borrowing would rise by an average of 36 billion pounds a year over the next five financial years, taking into account the time required to generate additional tax revenue.
This is a breaking news story and will be updated soon.
