Pointless Being the Point
Yesterday, UK Chancellor Rachel Reeves delivered her Spring Budget to the House of Commons. Since the government’s first budget last year, bond markets have not been kind to the Chancellor, taking its angst out in the form of higher yields. The selling (and increased issuance) of UK gilts has inevitably created elevated borrowing costs that has in turn made the government’s fiscal ambitions and outlook increasingly unstable.
As had been reported in the days leading up to the budget, the Chancellor was not seeking to raise taxes. Therefore, all the Chancellor had to play with yesterday in order to keep the bond market in order was spending cuts. The Chancellor did show some restraint on spending although reading between the lines near term spending is still due to increase although with limited fresh gilt issuance. Ultimately the budget amends the fiscal outlook for this Parliament very little, which ultimately was likely the aim. Instead, the Labour Party will be hoping for increased economic fortunes in order to revise longer dated fiscal reforms announced yesterday.
So far, the market’s reaction has been positive with yields remaining well within recent ranges. The test is far from over with an estimated fiscal headroom shy of £10bn. Sterling watchers will remember the market’s reaction to the Chancellor’s autumn budget seemed to have a delayed fuse. GBP will continue to be a good barometer of market sentiment also with any move higher in yields unlikely to have its usual positive correlation with the currency. We did witness a marginal sell off in GBP yesterday which was likely as much a result of an inflation statistic miss earlier in the day as it was the risk associated with the Chancellor’s budget announcement. Therefore, it is likely still too early to conclude the demise of the Pound.
Discussion and Analysis by Charles Porter
Related Insights
Daily Brief – Delayed fuse
Charles Porter
Thu 30 Apr 2026
Delayed fuse Last night’s Federal Reserve decision held all the potential requirements for a momentous occasion. Markets had been ascribing a high value to the event with options pricing suggesting the decision posed a significant risk towards exposed assets. Ultimately, the potential swan song publication of Chair Jay Powell passed without incident. Claims from some […]
Daily Brief – Cancelled Travel Plans
Charles Porter
Thu 23 Apr 2026
Cancelled Travel Plans No, this time not because of the impending jet fuel crisis threatening continental travel as we discussed yesterday. Instead, I’m referring to the grounding of Vice President Vance whose trip to Islamabad, Pakistan was cancelled on Tuesday to avoid embarrassment. The Vice President was expected to travel on Tuesday to resume talks […]
Daily Brief – Sterling defence
Charles Porter
Tue 28 Apr 2026
Sterling defence Options markets are flashing warning signals for Sterling. It’s no secret that the forthcoming Bank of England monetary policy decision later this week poses a risk for the Pound. However, there are risks mounting further afield. The local elections on May 7th are a material risk for GBP, for example, with traders concerned the […]
