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Pound plunges and bonds sinks, after the tax cuts announcement!

The 10-year yield was set for its biggest daily rise since 1998, BBC reported!

At 1:45 p.m. it had risen 26 basis points to 3.759%, as Investors dumped U.K. government bonds and the pound today,

After the administration of new Prime Minister, Liz Truss unveiled plans for tax cuts and new spending that will require billions in additional bond issuance.

Tweet on latest tax cuts and pound reaction

The pound, which has already fallen by nearly a fifth this year against the dollar, slid another 3% Friday to $1.09,

Hitting a new 37-year low record. It is now within an inch distance of its all-time low of around $1.05 hit in 1985.

Bond prices fell across the board, pushing up yields. The yield on the 10-year U.K. government bond jumped to 3.830% from 3.502% before the announcement.

  • High inflation erodes the value of the fixed payments bonds offer.

The U.K.’s debt management office said it will need to issue an additional £72 billion to fund the package, according to Antoine Bouvet, a senior rates strategist at ING. That is equivalent to about $81 billion.

Mr. Bouvet said the flood of new issuance comes at a time when demand for U.K. government bonds is already under pressure.


source; BBC/Bloomberg
Image: Currencies