Foreign demand for Government bonds has bounced back strongly since the turmoil that followed Liz Truss’s mini-Budget last year, according to the head of the Debt Management Office.
Robert Stheeman, who is responsible for selling £237billion of UK gilts to investors this financial year, said he has been impressed by the rapid rebound.
‘Considering the challenges that the gilt market faced last year, the speed with which conditions have returned to normal and the extent to which the market has stabilised I think is notable,’ he said after this week’s Autumn Statement.
The recovery includes renewed appetite for gilts from foreign investors – a sign Britain’s standing on the international stage has not been damaged.
Blunder: Liz Truss’s mini-budget in September last year sent bond markets into freefall, putting pension funds at risk and forcing the Bank of England to intervene
‘I talked about how quickly things return to normal, and that definitely includes international interest,’ Stheeman said.
In September last year, the Bank of England intervened in the bond market after record price falls in response to Truss’s budget plans put some pension funds at risk of collapse.
Since then, Prime Minister Rishi Sunak and Chancellor Jeremy Hunt have put finances on a more orthodox course.
Britain no longer pays a big risk premium for its borrowing, but outright interest rates are still high.
A month ago, 30-year gilt yields reached their highest since 1998 at 5.2 per cent. Now, they are just below 4.7 per cent, having risen since the Autumn Statement.
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