Osborne Predicts Deficit Reduction

Ten-year gilts rose, signifying a decrease in U.K. borrowing costs following Chancellor of the Exchequer George Osborne’s announcement that deficit reduction is planned during the next fiscal year. This rise follows a recent decline in gilts due to the deficit increase during this past February. This past fiscal year the Debt Management Office sold 179.4 billion pounds of gilts and is planning to sell 167.7 billion pounds this coming fiscal year, a decrease of approximately 6.5 percent.

Analysts describe this support for gilts as an expression of fiscal austerity and monetary policy neutrality. The U.K. is trying to retain its AAA credit rating. The gain was small, however, compared to the 3.1 percent gilts have lost this year. Last month was the highest February on record for net U.K. borrowing excluding support for banks.

Source: Bloomberg

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