UK bond market on edge amid political turmoil – business live

Political instability, fears of drawn-out Labour leadership campaign, and possibility of Reform government all blamed for jump in UK borrowing costs

IS THE UK THE HARBINGER OF THINGS TO COME?

That’s the eyecatching title of a new note from City firm TS Lombard this morning, who point out that Britain has been suffering under the new ‘macro supercyle’ (which incudes the new multipolar global order, increased conflict, and more interventionist national policies).

The UK has frontrun all the downsides of the new macro regime and none of the upsides

We see little hope of the UK catching the upsides any time soon

Political volatility will continue to reign in the next few months

But risks of a blowout budget seem overdone

And the UK is closest to the brink of recession if the Middle East shock rolls on

“If we saw, let’s say Andy Burnham decided to run and there was some talk of a move to the left and more spending, I don’t think that would be taken well. And therefore, the bond market would give out a warning, right? If we see yields go anywhere near 6%, that that’s going to really scare people and it’s going to put up the cost of spending that we already have on our large debt position.”

“We saw the long gilts rise to the highest yields that we’ve seen in almost 30 years, and they have a very strong message for Labour. Get your house in order.” Continue reading...