The cost of government borrowing jumped, while UK stocks and the pound rose, as markets digested news of billions in borrowing and tax rises announced in the Budget.
while There was no panicThere has been concern about the amount of borrowing and changes to the Chancellor Rachel ReevesWhich she imposed on herself Borrowing rules.
When the market opened on Friday, the government’s borrowing rate stood at 4.476% on its 10-year bonds – the benchmark for government borrowing costs.
The price is down from yesterday afternoon’s high – 4.525% – but represents a strong bullish sign.
By morning, this rise was evident as the interest rate, known as the yield, rose to 4.492%.
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The pound also rose to $1.29, or €1.1873, after yesterday seeing the biggest two-day drop in the trade-weighted pound sterling in 18 months. Values are also higher than they have been for the vast majority of the past two years.
On the stock market front, the benchmark index, the list of the 100 largest companies on the Financial Times Stock Exchange (FTSE), rose by 0.36%.
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The UK’s largest and most concentrated FTSE 250 index rose 0.1%.
While there was a specific response to the Budget, which uniquely affected UK borrowing costs, the response was much lower than after the UK Mini-Budget.
Other factors at play
Many forces are influencing markets with the US election on the brink and interest rate decisions in both the UK and US due on Thursday.
Over the past month, the UK government’s debt costs have risen in line with US borrowing costs. Traders were calculating the possibility of a second Trump presidency and the impact his potential higher inflation policies could have.
But the interest rates, or yield, on 10-year British and US government bonds moved away from each other on Wednesday afternoon after the budget.
At that point, the yield on 10-year UK bonds, commonly known as British government bonds, began to rise and despite some declines was on an upward trend.
The budget was also affected by the opportunity for an interest rate cut by the Bank of England. While the probability of a decline is still high at 83%, it is lower than the 94% probability yesterday morning, Wednesday.