Published by Global Banking & Finance Review®
Posted on March 26, 2025
3 min readLast updated: January 24, 2026
Add as preferred source on GoogleUK finance minister Rachel Reeves announced fiscal changes, affecting gilt yields and economic forecasts. The UK will borrow more than expected.
LONDON (Reuters) - British finance minister Rachel Reeves on Wednesday announced cuts to spending plans and lower economic growth forecasts in her latest fiscal statement to parliament.
Britain's government is set to borrow 47.6 billion pounds ($61.4 billion) more between now and the end of the decade than expected five months ago, according to forecasts from the country's fiscal watchdog published on Wednesday.
Still, government bond yields fell after the UK's Debt Management Office said it would issue fewer bonds than expected in 2025/26, cooling market fears about another wave of supply.
Two-year gilt yields were last down almost 7 basis points on the day at 4.24%, while 10-year yields were almost 5 bps lower at 4.71%.
Sterling was down 0.5% at $1.2877, having traded at $1.2900 just before Reeves started speaking, it was also softer on the euro 83.65 pence to the common currency.
London's blue-chip FTSE-100 stock index was last up 0.22%, largely where it was before the announcement.
COMMENTS:
RORY MCPHERSON, CHIEF INVESTMENT OFFICER, WREN STERLING:
"The spring statement is what markets wanted -- pretty boring and uneventful on the back of what were probably quite big events in previous iterations."
"It is largely a non-event."
"We're pretty positive on UK assets. We have an overweight in equities in the UK, and we are constructive on short-dated UK bonds. We're cautious of longer dated bonds because of all the debt issuance, that will pressure gilt yields."
PHILIP SHAW, CHIEF ECONOMIST, INVESTEC, LONDON:
"It's clear that without corrective action from the government the OBR (Office for Budget Responsibility) would have concluded that the fiscal rules have been missed by 4 billion pounds. As widely trailed, the Chancellor has tightened expenditure in various areas, particularity welfare."
"We're now on course to meet the fiscal rules, but that is subject to economic events over the period between now and the budget, and if things go badly with the economy and the public finances, then the Chancellor will be back to square one, perhaps with a need to tighten spending again or perhaps tax increases or even a combination of both. But it's pretty clear that credibility is absolutely critical for the government in being on track to meet the fiscal rules."
VASILEIOS GKIONAKIS, SENIOR ECONOMIST AND STRATEGIST, AVIVA INVESTORS, LONDON:
"Reeves’s aims were to really double down on discipline as far as the fiscal rules are concerned and restore the headroom. She has done both."
"Of course, whether that remains to be the case… in the autumn budget, it remains to be seen."
"There is a risk that she will have to reinstate part of the headroom in the autumn and to the extent that she has delivered welfare and departmental spending cuts, that increases the likelihood that she will have to go down the road of increasing taxes."
(Reporting by the Reuters Markets Team; Compiled by Dhara Ranasinghe, editing by Alun John)
The main topic is the UK finance minister's spring statement and its impact on gilt yields and economic forecasts.
Rachel Reeves announced spending cuts and revised economic growth forecasts, with increased borrowing expectations.
Government bond yields fell, and there were minor fluctuations in sterling and the FTSE-100 index.
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