The jump in gilt yields is partly driven by fears that Labour may increase borrowing again next year, as well as people selling down ahead of the US election, said investors.
“It’s a function of, one, market positioning and, two, market’s nervousness around some of the assumptions that went into the Budget yesterday,” said Ben Nicholl, a senior fund manager at Royal London Asset Management, citing growth and tax-raising estimates.
“There is a fear, I think, that Labour will have to come back to the bond market in April, to increase borrowing and raise more taxes.”
Moyeen Islam, a fixed income strategist at Barclays, said investors were cutting positions ahead of a number of big events including US jobs data and the election.
“There’s a lot of risk-exiting that is going on,” he said. “There is nobody here to steady the market.”
