: Gilt yields jump to highest since 2008 crisis after IMF hits out at U.K. budget

by | Sep 28, 2022 | Stock Market

U.K. bond yields surged to fresh 14-year highs after the International Monetary Fund criticized the government’s proposed £45 billion of debt-funded tax cuts and the Bank of England inferred it would hike interest rates further to combat the additional inflationary pressure the fiscal strategy may unleash. The 10-year gilt yield
rose 4.4 basis points to 4.558% and the more monetary policy-sensitive 2-year gilt yield
gained 5.3 basis points to 4.670%. Bond yields move in the opposite direction to prices.

The selling pushed benchmark borrowing costs to their highest since the depths of the global financial crisis in 2008. The 2-year has jumped more than 120 basis points in just the previous four days as investors dumped U.K. assets in response to new finance minister Kwasi Kwarteng’s budget, delivered on Friday.

The International Monetary Fund late on Tuesday put out a scathing assessment of Kwarteng’s proposals, which included tax cuts alongside already announced energy support payments, mainly paid for by an extra £64 billion of bond issuance. “Given elevated inflation pressures in many countries, including the U.K., we do not recommend large and untargeted fiscal packages at this juncture,” the IMF said. “It is important that …

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