The UK 10-year gilt yield was broadly steady at 5.15% as investors digested Chancellor John Healey’s first major speech ahead of the October 28 budget. Healey vowed to maintain fiscal discipline and rebuild the UK’s credibility in international bond markets, while also setting out plans to stimulate regional growth. These include using institutions such as the National Wealth Fund and the British Business Bank to help crowd in private investment.
However, higher borrowing costs—driven by renewed inflation worries amid the US–Iran conflict and uncertainty over Prime Minister Andy Burnham’s spending plans—are shrinking the government’s fiscal headroom and strengthening expectations of tax rises in the upcoming budget.
In commodity markets, oil prices neared seven-week highs following US strikes on Iranian oil tankers. On the domestic front, UK firms increased full-time hiring in August for the first time in four years, even as housing market data from Lloyds showed UK house prices falling year-on-year for the first time since November 2023.
