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Analysts have warned that the decrease in borrowing costs gave the UK Chancellor Rachel Reeves a greater space for maneuver because she is trying to maintain its narrow financial rules, but public financial resources are still being exposed to the country's deteriorating expectations.
The UK government bonds have wiped the largest part of their losses since the Reeves budget in October, which made the long -term borrowing costs close to the level they maintained before its tax plans and spending in the gilded market were accelerated.
Doctrine revenues decreased for ten years, which are inversely transmitted to prices, by 4.44 percent on Friday, less than the highest level last month by 4.93 percent and near the pre -budget level of 4.32 percent.
but Destious expectations This week from the Bank of England, which has turned to its growth in half for 2025, indicates that the government will struggle to reduce borrowing quickly in the coming years.
“He explains how quickly the mood music changes,” said Nick Hayes, head of fixed income in Axa Investment managers. “Not so long ago, Gilts was in” the perishing ring. “The yield was heading to 5 percent.”
The emission in Gilts is due to a mixture of global bond pools and the possibility of reducing interest rates faster by the Bank of England, which announced the reduction of a quarter of a point on Thursday, amid signs of falling economic growth and reduced inflation.
The market step provided a countryside for Fairfes because it tries to keep its financial ruling that it imposed self, as daily spending is covered by tax receipts.
The budget responsibility office, the UK's financial agency, said that its chancellor has 9.9 billion pounds in the foreground – the reserve margin it enjoys from facing its financial rule.
The subsequent height of the doctrine revenue led to the economy to warn that this is a slender room for maneuver-a third lower since 2010-has been eliminated at high borrowing costs.
Andrew Godwin in Oxford Economic Oxford estimates that due to a doctrine of a sect in the market, Rivis now owns about 5 billion pounds in the financial offering, and half of October, but better than the negative position in the depths of the January sale process.
But he warned that the additional range has acquired “Reeves” compared to what could happen if (OBR) changes its growth expectations or profits.
He added: “It was a great risk to leave a very small few to start, and this danger may crystallize.”
Many fund managers have a similar analysis and argue with more discounts in spending or tax height will be needed to support the financial situation of the United Kingdom.
Economists say that if OBR puts an economic prediction similar to BOE estimates this week, then it would be so. Add to pressure on public financial affairsBecause of the low growth in tax revenues.
BOE now expects GDP to grow only 0.75 percent this year, before it reaches 2026 and 2027, while unemployment may rise to 4.75 percent.
It has also become more pessimistic about the rate at which the British economy can grow without increasing inflation.
On its annual shares on the offer of the economy, the central bank said that the potential growth rate of the United Kingdom – is often described as a “speed limit” on the growth of the sustainable gross domestic product – slowed down to 0.75 percent only by the beginning of 2025, to the bottom of 1.5 in The hundred in the previous year.
The Bank of England said it expected to capture potential growth in the following years, leaving its expectations by 1.5 percent.
Some economists expect that OBR may eventually have to reduce its expectations for potential growth in view of the constantly disappointed performance of the UK's productivity in recent years.
This would deal with a dangerous blow to public financial resources, because OBR expectations are the basis of government budget plans.
“The discounts to possible growth predictions” will have “truly significant effects on Rachel Reeves room.”
He added that the counselor will “hope” that obr does not decide to conduct such a classification.
