Investing.com – British government bond prices extended gains on Friday (14th), amid speculation that British Prime Minister Liz Truss will be forced to abandon a massive unfunded tax cut plan.
As of 18:20 Beijing time (06:20 a.m. EST), it fell back to 4.333% (bond prices and bond yields are negatively correlated) from the 5% breakout earlier.
Yields, which are more sensitive to BoE rates, were down 14 basis points at 3.65%. The yield was down 21 basis points at 3.977.
UK gilt yields have soared this week, as many UK pension funds are forced to sell the most liquid asset on hand, bonds, to margin calls on their leveraged investments. The highest since the 2008 financial crisis.
The Bank of England was also forced to take over sold-off bonds in an effort to curb market volatility, injecting nearly £18bn of liquidity into the market. Earlier this week, however, the Bank of England said it would end outright bond purchases on Friday, but earlier in the day also said it reserved the right to adjust today’s 10 billion pound bond purchase limit if necessary.
Meanwhile, gilts rallied sharply on Thursday (13th) amid expectations that Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng would withdraw their tax cut plans, with Liz Truss having given up on cutting income tax for the UK’s top 2% of earners. plan, but the move will only affect a small part of the overall plan.
However, according to media reports, Kwasi Kwarteng will allow corporate income tax to be raised next year. Former finance minister Rishi Sunak had planned to raise the 19% income tax rate implemented during the epidemic to 25%.
Meanwhile, it was reported on Thursday that Conservative MPs had planned to oust Liz Truss, who had been in office for less than two months, and to replace Rishi Sunak and Penny Mordaunt.
Support for the Conservative Party has fallen due to the turmoil of the past two weeks. Both YouGov and Polling People polls put the opposition Labour Party at over 50 per cent, with the Conservatives below 20 per cent.
[This article is from Yingwei Caiqing Investing.com, to read more, please log on to cn.investing.com or download Yingwei Caiqing App]
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Compilation: Liu Chuan