Particle.news
Download on the App Store
6 ARTICLES
·
2h ago

UK Markets Brace for Reeves’s Budget Test as Income Tax Hike Is Ruled Out

Investors warn Reeves must build a larger fiscal buffer to steady markets.

People walk near the Bank of England building in London, Britain, July 3, 2024. REUTERS/Maja Smiejkowska/File Photo
Britain's Chancellor of the Exchequer Rachel Reeves poses with the red budget box outside her office on Downing Street in London, Britain October 30, 2024. REUTERS/Mina Kim
Image
Image

Overview

  • Reeves has no plans to raise income tax, with a freeze on tax thresholds expected to raise about £10bn a year, according to ING estimates.
  • Large investors are pressing for materially greater fiscal headroom, with some calling for more than £20bn to reinforce credibility under the debt rule.
  • UK government bond yields remain elevated, with 10-year gilts around 4.53% and 30-year gilts near 5.35% as markets assess the coming budget.
  • Sterling trades near $1.31 and is viewed by strategists as vulnerable to budget disappointment after recent declines.
  • Franklin Templeton’s David Zahn cautions that a weak package could push yields higher and potentially force a secondary budget, while money markets price roughly a 75% chance of a December BoE rate cut if growth prospects dim.