Pound and gilts slump amid doubts over Chancellor’s future
The value of the pound and long-term Government bonds slumped sharply after Sir Keir Starmer failed to back Chancellor Rachel Reeves.
Ms Reeves was visibly tearful in the House of Commons over a “personal issue”, as her position and Government credibility faced scrutiny after a U-turn on welfare plans.
The U-turn on the Welfare Bill is now expected to stop the Labour Government from securing almost £5 billion worth of savings as it seeks to balance the books.
Financial markets were knocked as a result, with the value of the pound and gilts dropping noticeably as the Prime Minister spoke in Parliament.
The pound slid by 1.14% to 1.358 against the US dollar on Wednesday. Sterling had risen to a fresh three-year high against the dollar on Tuesday.
The currency also fell by 0.8% to 1.155 against the euro, striking its lowest level since April.
Concerns
Meanwhile, the yield on Government bonds, called gilts, jumped in the face of concerns among investors.
The yield on 10-year gilts rose by 0.17 percentage points to 4.63%, while the 30-year gilt rose by 0.22 percentage points to 5.45%.
Both of these were the sharpest increases since US President Donald Trump’s tariff plans shook up financial markets in April.
Gilt yields move counter to the value of the bonds, meaning that their prices were lower on Wednesday because of the change.
The rise in yields also means it will be more expensive for the Government to pay off debts, putting further pressure on its finances.
‘Tanking’
Kathleen Brooks, research director at XTB, said: “UK bond yields have taken a step higher as we progress through Wednesday, and Prime Minister’s Questions has not eased concern that the bond vigilantes are circling. UK bonds are tanking today.
“If yields continue to rise at this pace for the next few days, the PM and Chancellor will have to decide if they want to have a sensible fiscal policy whereby public sector debt is reined in, or whether they want to please the Labour backbenches, who don’t seem worried by rising debt levels and forget that we are in a new era, where bond investors can shun sovereign debt in favour of less risky, less indebted corporate debt.
“Overall, this could be the start of another fiscal crisis for the UK.”
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Unlikely to be a personal issue, more likely to be kicked out. I think we are already in a crisis otherwise she won’t need a reason to cry.
He is a liability and no mistake…
Rachel Reeves crying!!!! Are we suppose to feel sorry for her? I am sure thousands of people cried when she robbed them of their winter heating allowance and the threat of losing their disability allowances.
I thought you loved me, West Streeting has the same look for him. Red Sonia needs a bucket…
The Cabinet…a creaking old ex-ship’s lifeboat full of strangers,
Ex-ships lifeboats saw their heyday for a few years post war, they could be converted into houseboats cheaply for the hard up and homeless, next came Fairey Marine and so on…
Aberdyfi Outward Bound began as a survival training base for young merchant seamen when torpedoed. Many young lives had been lost whilst abandoning ship, soaked in oil, likely burnt and succumbing to shock and cold…
This course taught them what to expect had how best to cope with it, they had some lovely ketch rigged craft, TK Warspite, not the battleship of course…
I thought it might take the financial markets a bit longer to conclude that what the government says and does are two very different things. Clearly not.
Look – I take no pleasure in seeing that woman being so upset – even though I think this lot are a bunch of duplicitous incompetent fools, but this is a farce of biblical proportions. These muppets are supposed to be running a country! We cannot survive another four years of this chit show.