| Bond vigilantes. on 09:32 - May 13 by nrb1985 |
Not sure you can say that the bond market is showing short termism here.
The front end of the bond curve, i.e. the shorter maturity gilts, have remained reasonably well anchored.
It's the longer duration bonds that have sold off because of concerns about what a new more left leaning fiscal regime will do to the UK's ability to pay down it's debt in the long run.
If Starmer wanted to really bring bond yields down he should be far bolder on Europe. He has nothing to lose now so may as well put deeper integration if not rejoining fully on the table. I'd vote for that! |
I suppose short-termism was the wrong word to use in the context of longer term gilts but it seems to me that there are a number of factors affecting the position of the UK - an outlier in terms of high bond rates - including the one you mention.
Those that I have seen mentioned, in addition to the fact that UK bond rates have ratcheted up a notch generally since Truss, include political instability, the prospect of a Reform government, the likelihood that interest rates now won't come down and the fact that the UK economy is predicted to be worst affected by the war in the Middle East.
I would argue that Burnham is not the left wing ogre that he is being portrayed, because he was a fairly orthodox member of the Blair and Brown government. And I think he is savvy enough to know the strength of the bond markets.
I suppose it is also possible that Streeting becomes leader and I would have thought that itself would make little difference when it came to the fiscal position because he is on the right of the party.
Perhaps the greatest danger is Rayner but then she is not the person I would favour as a replacement.
All of this is not to say that a leadership challenge wouldn't cause some upset in the bond market which I would hope would not be permanent with the right leader but I just can't see that things can carry as they with a despised and lame duck PM.
As regards the EU, the Labour manifesto ruled that out, and I am not sure any candidate would go for that. But if we re-joined, and joined the Euro we would benefit from their lower borrowing costs. [Post edited 13 May 13:12]
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