(Finance) – With the confirmation that Rishi Sunak will be the next British Prime Ministerafter his rivals withdrew from the race and after one of the most turbulent periods in British political history, calm is returning to the bond market of the country. The yield on 30-year government bonds (gilts) fell 30 basis points today to 3.74%, the yield on 10-year gilts fell 31 basis points to 3.73%, and the yield on gilts at 3.73%. 5 years fell 28 basis points to 3.77%.
“What we have seen when looking at the yields of the gilt market is that credibility has been recovered, but I think this deserves further attention“Bank of England Deputy Governor Dave Ramsden said today.” I believe a return to stability in policy making and framing of fiscal events will be very important, “he said before the Parliamentary Committee on the Treasury.
However, that today’s gilt movements are not the end of the storm, it is also clear to Sunak, who today said that “the United Kingdom is a great country, but there is no doubt that we face a profound economic challenge“, adding that his” priority “will be to bring the nation together.
The first real test for the UK will come on October 31st, when Finance Minister Jeremy Hunt – the fourth person in the role in four months – is expected to present a new budget. “To restore credibility, at a minimum, the government must correct its three most damaging moves: Exposing the public coffers to all potential rising costs in international gas prices, planning more than £ 250 billion in tax cuts for the next five years and avoiding OBR scrutiny – commented Michael Michaelides, bond analyst at Carmignac – The announcements made so far have not been able to make up all the lost ground. “
“It is not necessary for the government to abolish the remaining aid on gas prices, nor the remaining tax cuts – he added – These, however, must be subjected to a complete cost assessment, defining a plan to pay them back quickly. The government urgently needs to announce and comply with new fiscal rules that close the structural budget deficit. This requires a combination of tax hikes, fewer tax cuts and spending restraint that is politically realistic. “
(Photo: © Eros Erika / 123RF)