UK bonds experienced a steep decline on Friday, extending significant losses incurred throughout the week, Bloomberg reports.
The sell-off was triggered by the Labour government’s budget and plans to issue substantial additional bonds.
The yield on 10-year notes surged by four basis points to 4.48% on Friday, marking a weekly increase of over 20 basis points – the largest this year. Market expectations for interest rate cuts have also been diminished as traders assess the potential impact of billions of pounds in extra spending on inflation and economic growth.
Chancellor of the Exchequer Rachel Reeves attempted to alleviate concerns by expressing the Labour government’s “No. 1 commitment” to “economic and fiscal stability.”
However, the ongoing bond market sell-off evokes comparisons to the gilt meltdown in September 2022, caused by former Prime Minister Liz Truss’s unfunded tax cut proposals.
