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Many Happy Returns
Gilt Yields and Ghosts of Budgets Past: Who's Afraid of Bond Vigilantes?
Nov 6, 2024
Gilt yields have surged following the Autumn budget, raising concerns about the legacy of Liz Truss’s mini-budget. The podcast dives into how government spending affects the private sector, questioning whether it crowds out or crowds in investment. It dissects market reactions to fiscal policies and the role of bond vigilantes in shaping financial stability. Discussions also reveal the challenges posed by high inflation and the call for more realistic budgeting to foster long-term growth amid uncertainty.
39:32
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Quick takeaways
- The rise in gilt yields post-autumn budget reflects investor concerns over increased borrowing and potential instability in the UK debt market.
- The debate on public investment's impact on the private sector centers on whether it crowds out or crowds in economic activity, affecting future growth prospects.
Deep dives
Impacts of the Autumn Budget
The recent autumn budget introduced significant increases in government spending alongside substantial tax rises and higher borrowing projections. Although market reactions seemed initially stable during the announcement, subsequent days saw an increase in gilt yields, raising concerns among investors. The speakers discussed the emergence of a notion termed 'bond vigilantes,' referring to investors who sell bonds in response to fiscal policies they perceive as detrimental. However, it was suggested that these market reactions stem from rational investor behavior rather than a coordinated effort, and blaming the investors mischaracterizes their role in the financial system.
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Discover
highlights
Listen to the best highlights from the podcasts you love and dive into the full episode