Markets have already priced in the government’s policy U-turn as the interest rate payments on long-dated government bonds, effectively state IOUs, sunk on Friday morning while the pound rose against the dollar and the euro.
As a result of the government’s anticipated rise in corporation tax, instead of the reduction it announced in the mini-budget, government bonds, known as gilts, fell.
These are the bonds that have had to be bought up as part of the Bank of England’s unprecedented intervention in the market to prevent a collapse in pensions as the market doubted the credibility of the UK’s economic plans.
