Should we worry about the headlines on UK gilts yields? A short 🧵 . As often happens when markets move, political commentators are looking in the wrong direction (1/9) “UK government seeks to soothe bond market nerves after borrowing costs soar” on.ft.com/3PrUbdJ - ThreadSky

uofgvc.bsky.social • 49 days ago

Should we worry about the headlines on UK gilts yields? A short 🧵 .
As often happens when markets move, political commentators are looking in the wrong direction (1/9)

“UK government seeks to soothe bond market nerves after borrowing costs soar”

https://on.ft.com/3PrUbdJ

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uofgvc.bsky.social•49 days ago

Markets at present are mainly reacting to what is happening in the USA - a very loose fiscal policy combined with sticky inflation which means higher interest rates. Uncertainty regarding the new administration’s fiscal & wider policy stance isn’t helping. (2/9)

uofgvc.bsky.social•49 days ago

The IMF has also said it’s worried about US spillover effects. So this isn’t really a story about markets reacting to U.K. fiscal policy or bad economic news. As Darren Jones Chief Sec to the Treasury said yesterday -the OBR will only update its U.K. economic forecast in March. (3/9)

uofgvc.bsky.social•49 days ago

But the U.K. is of course affected: we are a small boat being buffeted in the wild sea of global markets. Which means that U.K. govt must continuously reassure markets that the fiscal rules it has adopted will be adhered to, whatever the OBR forecast says in March. No Ifs no buts. (4/9)

uofgvc.bsky.social•49 days ago

The main message for the U.K. govt is that there’s no way out of the fiscal constraint except through redoubling efforts on the growth mission. This needs to yield results quickly. In that regard I would like to see the government pull out all the stops on the supply side (5/9)

uofgvc.bsky.social•49 days ago

In particular it needs to accelerate its plans on reducing the costs of infrastructure and major development through planning. It must look at how the labour supply is responsive to our needs which means revisiting skilled migration visas through skilled and youth mobility. (6/9)

uofgvc.bsky.social•49 days ago

On the importance of skilled migration for U.K. growth, the OBR has already shown in its 2024 forecasts just how much that could yield in growing the economy, even BEFORE the public investment announced in the budget begin to impact on growth - that will take longer (7/9)

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