Spring Statement 2025: Markets ‘shrug off’ speech as gilt sales revised lower
The Debt Management Office (DMO) said it was planning £299bn of gilt sales in 2025 to 2026, slightly below the £302bn initially expected despite the government’s borrowing plans.
However, this still marked the most extensive package since the pandemic.
The DMO said it would issue the smallest selection of long-maturity gilts in its 27-year history this year as it aims to make borrowing more attractive to investors.
The DMO confirmed the sales would start in April, which saw the yield on two year gilts drop by as much as eight basis points, with 10-year gilts down seven basis points.
The breakdown of the planned gilt sales leaned towards the short-end, with short-dated convention gilts making up £110.9bn, medium-dated £89.7bn, and long-dated £40.2bn, according to Bloomberg analysis.
Matthew Amis, Investment Director at Aberdeen, said: “Aided by this morning’s better inflation data, the gilt market should be relatively happy this afternoon.
“WOBR forecasts show GDP growth in the medium term slightly higher and inflation slightly lower. But more importantly the amount of gilts issued this year is well below market consensus.
“To add to the gilt positive tone the reduction in long maturity gilts has far exceeded market expectation. This should give the much-beleaguered gilt market the opportunity to perform in the short term.
“This should buy some breathing space before June’s spending review.”
Jason Borbora-Sheen, multi asset portfolio manager at Ninety One, said the restored headroom and planned sale posed a “helpful statement for UK bonds.”
Jason Hollands, managing director of wealth manager Evelyn Partners, said: “A key message was that the UK is on track to meet its ‘non-negotiable’ fiscal rules, words that she must hope will reassure the bond markets where gilt yields had been ticking upwards in recent days”
Gilt yields have risen since the government’s Autumn Budget, hitting 4.9 per cent in January, nearing highs of Liz Truss’ infamous mini budget.
In the aftermath of the Autumn Budget, 10-year yields closed at 4.31 per cent, which marked the highest level since the 2024 general election.
Markets ‘shrug off’ Spring Statement
Markets remained muted following the Chancellor’s speech with Hargreaves Lansdown market analyst Susannah Streeter referring to the statement as “a game of two halves”.
“Reeves appeared to be on the losing side of investor sentiment with downgrades to growth this year, but scoring goals of optimism with upgrades to GDP further ahead, and forecasts for real disposable income to rise in the months to come,” she said.
As with gilt yields, the FTSE 100 and FTSE 250 lost ground and then regained it in the latter half of Reeves’ speech following prospects of growth.
Streeter said increased defence spending would be “welcomed by defence contractors” but highlighted a lack of “significant moves in the share prices of big names”.
Dan Boardman-Weston, chief executive at BRI Wealth Management, said: “Markets have shrugged off the announcements as they have bigger things to concern themselves with at the moment.
“The UK remains in a precarious position and deep structural reform is required to set the country back on the right track.
“Whilst a number of the headwinds that the country has seen in the past few months are not the fault of the government, a number are, and little that we’ve seen or heard will deliver the change that this country requires.”