Truss ‘Risk Premium’ Still Dogs UK Bonds Where Volatility Reigns
- Hunt scraps more tax cuts during a statement on Monday
- Investors point to plenty of fiscal, political risks ahead
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The UK bond market’s nascent recovery is littered with potential pitfalls despite the government’s U-Turn on vast fiscal stimulus.
Investors are still watching out for the medium-term fiscal plan at the end of the month, which will offer much-needed clarity on looming gilt supply. Also, the extent of further Bank of England rate hikes is not clearly outlined and the ongoing deleveraging from pension fund strategies could exacerbate volatility in long-dated gilts -- an unhealthy mix for a market designed to move slowly and steadily.