Investors and bond managers are feeling relaxed ahead of Chancellor Rachel Reeves’s budget announcement, despite the potential for higher borrowing. Reeves has promised new fiscal rules to unlock investment, reassuring investors and maintaining confidence in the UK economy. Bond managers like Peder Beck-Friis of Pimco find UK government debt attractive, expecting a tight fiscal path and cautious spending to maintain fiscal credibility. UK bond yields have been rising, but the gap between UK and US borrowing has narrowed. Most bond managers are optimistic about holding UK debt, with some considering it a preferred market. The budget is expected to maintain fiscal credibility and focus on financing investment.
In other news, UK shop prices are falling, fueling speculation of a Bank of England rate cut in November. Energy giant BP has reported a third-quarter profit decrease due to weaker oil prices, but beat City forecasts. Despite falling profits, BP is continuing its cash flow to investors through a buyback program. Tomorrow’s budget is expected to include a national minimum wage increase of up to 6%, benefiting low-paid workers. Retailers are warning of potential price increases due to geopolitical tensions and climate change impacts, urging Reeves to introduce a Retail Rates Corrector in the budget.
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