FX.co ★ UK 10-Year Gilt Yield Rises as UK Budget Deficit Weigh on Sentiment

UK 10-year gilt yields rose to 4.7%, reaching a two-week peak, following the release of public finance data which revealed a significantly larger deficit than anticipated. In August, public sector net borrowing amounted to £18 billion, surpassing the forecasted £12.8 billion, marking the highest figure for the month in five years. Over the initial five months of the fiscal year, borrowing totaled £83.8 billion, exceeding the Office for Budget Responsibility's projections by £11.4 billion, with revisions adding £5.9 billion to previous months. These figures underscore fiscal challenges ahead of the upcoming November budget, where Chancellor Reeves is anticipated to introduce tax increases. The rise in borrowing costs coincides with persisting global bond market unease regarding debt levels. Simultaneously, the Bank of England maintained interest rates at 4% following a 7–2 vote, slowed its quantitative tightening to £70 billion, and reiterated a cautious approach to easing. Across the Atlantic, the Federal Reserve reduced rates by 25 basis points and indicated further cuts, although Chair Powell described the decision as a risk management measure.