Pre-budget jitters cause cost of government debt to creep higher
PRE-BUDGET jitters have caused the cost of government debt to creep higher.
The rise comes despite the Chancellor desperately hoping to avoid a repeat of the meltdown that followed Kwasi Kwarteng’s mini Budget in 2022.
Government bonds, or gilts, are seen as the telltale sign of global investors’ opinion on the health of the UK economy and its leadership.
They also shape investors’ views on whether a Budget has been a success or failure.
Gilts are issued by the Government as parcels of debt that pay out a return — or coupon — to investors over a fixed term, such as five, 10 or 30 years.
The yield reflects the amount of interest paid, and increases when the price of a bond falls to reward the investor for the risk of holding a cheaper asset.
In recent days, the interest on benchmark ten-year government debt has crept up to 4.32 per cent — a level last seen in the chaos of the mini Budget two years ago.
Rachel Reeves today has to deliver a Budget that will promote growth, but not scare away big private investors she must rely on to fund UK infrastructure projects.
Matthew Ryan, head of market strategy at Ebury, said: “Should she convince investors that Labour have a credible plan to boost growth, without triggering a blow-up in the gilt market, then the pound could emerge unscathed.”
EASE UP PLEA TO REEVES
ANOTHER senior drinks boss has told Rachel Reeves: “Please just leave us alone Chancellor.”
Ralph Findlay, chairman of C&C Group who own Magners cider and Tennent’s Lager made the last-ditch plea ahead of the Budget today.
He said the industry was facing the threat of higher alcohol duty, bottle recycling and packaging charges, higher staff wages and the end of business rates relief.
He told Sun Business: “There is already quite the burden on the sector as you can see from the number of pub closures.
“The sector would do well with less interference.”
His eleventh-hour call came as C&C Group said its sales of cider had slipped by 3 per cent to £715million due to a soggy summer.
This was despite Tennent’s, already Scotland’s most popular beer, gaining even more market share due to Scotland’s involvement in the Euros in Germany.
MAC PLOTS COMEBACK
McDONALD’S is resting its hopes of a sales revival on a new £5 meal deal and Chicken Big Mac as it fights to win customers.
The fast food giant, which last week had Donald Trump serving up fries from one of its restaurants, yesterday reported a 1.5 per cent slip in global sales.
It called out the UK as one of its most difficult markets.
Chris Kempczinski, chief executive, highlighted the success of its “three for £3 menu” but admitted growth in the US had been disrupted by an E.coli outbreak linked to its quarterpounder burgers.
He said it had reintroduced quarterpounders but it would have to “restore confidence”.
BP PROFIT SLIDE
BP posted £1.75billion in profits for the three months to September yesterday — its lowest level in four years.
The company said it had been hit by lower refining margins.
New boss Murray Auchincloss has said he will focus on high profit margin businesses, in contrast to his predecessor Bernard Looney’s strategy to grow BP’s cash-hungry renewables side.
Despite war in the Middle East, oil prices have dropped to around $71 due to falling demand in China and a glut of oil production.
‘NO HSBC SPLIT’
THE boss of HSBC yesterday denied separating the bank into eastern and western divisions will lead to a full split.
HSBC has been hit by the Chinese economic slowdown and tensions between Beijing and the US. Georges Elhedery said his shake-up would make the bank more “agile” and was not an “intent to split”.
Senior managers will be cut.
Pre-tax profits increased by £600million to £5.9billion in the past three months.
Shares rose four per cent on news of a fresh £2.3billion share buyback to sweeten investors.
‘£1BN HIT’ IS BRAKE ON BANK
A POTENTIAL billion pound hit from the motor insurance mis-selling scandal has prompted the UK arm of Santander to delay results.
The Court of Appeal ruled on Friday that car finance firms should not get commission from lenders without drivers’ permission first.
Analysts think Santander could face a £1.1billion bill.
The Spanish bank yesterday said that while it expected the judgment to be appealed, it would have to consider the costs of the potential damaging exposure.
Santander shares dropped by as much as 3 per cent yesterday, a day after shares in car finance rivals LLOYDS and CLOSE BROTHERS were hit.
Analysts reckon the decision could pave the way for as much as £16billion in compensation payments from British lenders and liken it to PPI 2.0 – a new version of the mis-selling of payment protection insurance.
BRITS are cashing in shares amid worries of a Budget tax raid.
Top stockbroker Hargreaves Lansdown said its customers have £12.7billion of cash in its accounts, £300million more than early in the summer.
LOANS ON HOME RUN
THE number of home loans approved in September hit the highest level since the month before the 2022 mini Budget.
Bank of England stats show mortgage approvals for new purchases rose by 700 to 65,600 — the fourth monthly increase in a row.
It is the highest since August 2022, the month before mortgage rates soared.
The Bank said the effective mortgage rate in September dipped on new loans from 4.8 per cent to 4.7 per cent.