UK 30-year gilt yields rise 7bps after PM Burnham’s fiscal policy comments spark uncertainty over spending plans.
The British pound regained some ground overnight after initial losses following Andy Burnham’s appointment as UK Prime Minister, though long-dated gilts remained under pressure. The 30-year gilt yield climbed 7bps as markets reacted to Burnham’s pledge to use flexibility within existing fiscal rules, raising concerns over the UK’s fiscal trajectory.
Burnham’s plans include a GBP850 million VAT cut on household electricity bills, reducing the rate from 5% to 0%, which the government estimates will lower inflation by 0.1 percentage point. The move, aimed at easing cost-of-living pressures, will be funded by scrapping a digital services tax, though further policy measures are under consideration.
Market focus remains on the potential impact of Burnham’s fiscal approach, particularly the appointment of John Healey as Chancellor, which has added to uncertainty. While the pound stabilized modestly, gilt yields reflect lingering concerns over long-term fiscal sustainability.