Government borrowing costs have eased after a sharp rise the previous day, following market concerns around the chancellor’s future.
Early trading saw the yield on UK 10-year bonds drop to 4.53%, down from 4.61% at Wednesday’s close. The movement suggests investors are reassured by the chancellor’s continued position, despite political uncertainty.
Sterling regained some ground after falling on Wednesday, rising to $1.3668. However, it remains below earlier levels.
Market reaction reflects growing support for Rachel Reeves, who was visibly emotional during Prime Minister’s Questions on Wednesday. The chancellor became tearful as she responded to criticism over a major U-turn on welfare reforms, which has left a £5 billion gap in her fiscal plans.
The reforms would have saved billions, but following political pressure, the Government scrapped them, raising concerns about the credibility of its broader economic agenda.
One analyst told the BBC that financial markets seemed worried that the Government’s commitment to fiscal discipline might also unravel if Reeves were to resign. The prime minister’s comments, stressing that he was working “in lockstep” with the chancellor, appear to have reassured investors to some extent.
The combination of political drama and economic pressure has made for a jittery 48 hours in the markets. The latest moves, however, suggest that investors still view Reeves as a stabilising force in Government – and that her presence helps anchor market confidence.
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