The UK Budget is on Wednesday. Will the pound keep its Budget day move to Friday?
Chancellor John Healey presents his first Budget on 28 October. A day before, the UK borrowed for five years at 5.036%, its highest rate since 2008.
What happened
The Debt Management Office sold £4.5bn of 5-year debt at an average yield of 5.036%, the highest since 2008, Reuters reports.
John Healey presents his first Budget as Chancellor on . The Chancellor is the UK’s finance minister, and the Budget is the government’s yearly plan for taxes and spending. Healey has not ruled out tax rises. He has said the government’s borrowing costs are at “historic highs“.
The UK borrowed at its highest five-year rate since 2008. On the Debt Management Office, which borrows for the government, sold £4.5bn of five-year bonds, called gilts, at an average interest rate of 5.036%. Investors bid for 3.51 times the amount on sale. On the pound fell against the dollar and the euro.
The government has two fiscal rules, its own limits on borrowing, and the new Labour leadership has promised to keep both. One says the government will not borrow for day-to-day spending by the end of this parliament. In March the Office for Budget Responsibility, the official forecaster, found £23.6bn of room under that rule. KPMG now puts the room at £12bn and the Institute for Fiscal Studies at £20bn. Investors expect £15bn to £20bn.
The bank Berenberg warned of “a risk of a jump in yields if Chancellor Healey announces more borrowing than investors expect on “. A yield is the interest rate the government pays on its bonds. Analysts at Morgan Stanley expect a quiet Budget.
The Budget will be held on .
HM Treasury, GOV.UK
The Bank of England publishes a daily rate for the pound against the dollar. The rates for 27, 28 and will show which way the pound moved on Budget day and by Friday.
Sources: theguardian.com
The Pattern
We looked for cases where the UK government presented a Budget while its ten-year borrowing cost was near a five-year high: in the month before, at least 95% of its highest month in the five years before. We started in 1973, after the UK let the market set the value of the pound in . We found five such Budgets, four of them between 1973 and 1990. (Bank of England; Bank of England; Hansard)
Show the other 3 cases
The Read
Four of the five Budget weeks kept their Budget day direction, and in three the pound moved further the same way by Friday. The plain up or down question is closer to even: the pound ended three of the five weeks higher against the dollar and two lower. This Budget is on a Wednesday, so two trading days follow it, as in 2025. There are no past Budgets for the fiscal rules question, which rests on the promise by Healey and the Labour leadership to keep both rules.
There are reasons for doubt. Four of the five Budgets came between 1973 and 1990, and two came from the same Chancellor, Denis Healey, in 1974. No Budget from 1991 to 2024 came with borrowing costs this close to a five-year high. The past rates were taken at noon in New York, a different time of day from the Bank of England rate in London. The Federal Reserve, the US central bank, ends a meeting on , so the dollar can move for its own reasons that week.
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