In the financial markets on the 23rd, British bonds plunged, and the pound fell to its biggest drop in 37 years. The UK government has announced a comprehensive economic stimulus package, but traders say the measures might undermine the Bank of England’s goal of squeezing inflation.
When British Finance Minister Kwartengu revealed the details of economic measures through tax cuts and fiscal stimulus, the five-year bond yield temporarily rose by 54 basis points (bp, 1bp = 0.01%) to 4.08%. That’s the biggest gain since Bloomberg began collecting data in 1992. The pound further fell once morest the dollar, temporarily dropping 2.1% to $1.1021.
“The combination of rising UK bond yields and weaker sterling is a very worrying combination, suggesting markets are pricing in a risk premium for the UK,” said Mike Liddell, portfolio manager at Allianz Global Investors. indicate. He “has clearly shown that the UK’s credibility to contain inflation is in jeopardy,” he continued.
With the Bank of England expected to tighten monetary policy much more sharply with this move, money markets have raised their expectations for rate hikes, and the next monetary policy decision to be made in November will raise interest rates by 1 percentage point. It is fully woven into the fact that there is Markets were not even pricing in a 0.75 percentage point hike before Finance Minister Kwartengu’s remarks.
Biggest tax cuts since 1972 in UK to boost economic growth
Original title:UK Assets Tank as Fiscal Binge Puts Policy Credibility at Stake
*POUND EXTENDS LOSSES VS US DOLLAR, DROPS 2.1% TO $1.1027
*TRADERS PRICE IN 100 BASIS POINT BOE RATE HIKE IN NOVEMBER（抜粋）
