The old normal

6 November 2019 By Swaha Pattanaik Follow @swahapattanaik

Britain’s main political parties are in a bidding war to woo voters before an election. Yet UK debt yields are steady. Hopes of more Bank of England easing is one reason. Bond vigilantes will wake up if a smooth Brexit opens the way for rate rises and government spending surges.

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Britain’s benchmark 10-year government bond was yielding 0.77% on Nov. 6. That compares with 0.72% on Oct. 29, the day British lawmakers approved Prime Minister Boris Johnson’s plan to hold a general election on Dec. 12. The yield premium that UK 10-year bonds offers over equivalent German debt was 108 basis points, compared with 105 basis points on Oct. 28.

Britain's state spending will head back to levels not seen since the 1970s if the two main political parties in the Dec. 12 election make good on their promises, the Resolution Foundation, a non-partisan think tank, said on Nov. 4.

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