The UK Labour government ditched plans to raise income tax after spending weeks laying the groundwork for the move.
The problem is that it puts a hole in the government budget. Now there is some spin that they got a better fiscal forecast from the OBR but the bond market isn’t seeing the same thing. It’s seeing an indebted country without the means to raise capital from taxpayers and fund the spending.
Now this isn’t exactly a Liz Truss moment as borrowing costs are low but UK 30-year bonds aren’t taking the news well as yields are up 16 basis points today.
UK 30 year bond yields
The pound isn’t sure what way to go on this as it’s been chopping in a narrow range around 1.3150 all week. It fell late yesterday when the budget story broke but it’s flattened out.
