Markets cheer UK bond sale plan as finance minister delivers fiscal update

Finance Minister Rachel Reeves cut the government's plans for spending increases to get back on track towards her fiscal targets, restoring the 9.9 billion-pound ($12.77 billion) headroom against her fiscal rules that had been wiped out by lower growth and higher borrowing costs.

Markets held on to near-term positives.

The UK's Debt Management Office said it would sell 299 billion pounds of gilts in the upcoming fiscal year, below the 304 billion pounds banks polled by Reuters had anticipated.

That followed lower-than-expected inflation data earlier in the day that had added to traders' bets on Bank of England rate cuts.

Live Events

Britain's 30-year bond yield fell as much as 7 basis points (bps) and was last down 5 bps at around 5.32%.

The gilt market has been on edge since Reeves's tax-and-spend budget in October, with benchmark borrowing costs touching their highest since 2008 in January. The scars of a mini-budget crisis in 2022 that sparked a gilt rout have loomed.

Allianz Global Investors portfolio manager Ranjiv Mann said markets had been nervous that borrowing plans could have come in higher than expected.

«Coming just below 300 billion (pounds) certainly gives comfort to the market,» said Mann, who continues to favour gilts in his portfolios.

Ten-year gilt yields fell as much as 6 bps but were last 2 bps lower at 4.735%, little changed from before Reeves' statement.

The gilt sale announcement was further sweetened by the lowest proportion of longer-dated gilt issuance on record at 13% of the