Reeves’ reckoning decided by gilts: deVere CEO
“Rachel Reeves’ reckoning will come from gilt markets”, warns the CEO of one of the world’s largest independent financial advisory organisations, as the UK chancellor prepares to deliver the Budget today.
The warning comes as UK sovereign debt trades toward the upper end of its recent range, global equities weaken, European futures soften, Asian markets close mixed, and gold inches higher as investors brace for the Office for Budget Responsibility’s (OBR) figures.
Nigel Green, CEO of deVere Group, comments: “Today’s Budget speech is only the first act. The real judgement arrives the moment investors see the OBR’s updated revenue profile, growth assumptions and borrowing outlook.
“The gilt market will decide whether the UK’s fiscal path is durable or whether the risk premium needs to rise.”
He continues: “Investors analyse the OBR’s tables with extraordinary precision. They examine the growth path, the revenue base and the implied borrowing pressure across the forecast window. These numbers guide expectations for supply, sustainability and long-term pricing.”
UK 10-year yields remain elevated after reaching multi-year highs earlier this year, reflecting a world in which governments everywhere are issuing more debt.
The UK’s refinancing requirement now exceeds £260bn for the fiscal year, and the Debt Management Office will confirm the updated remit shortly after the Budget. Traders expect a heavy programme and will price gilts accordingly.
The chancellor is preparing to announce a wide “smorgasbord” of tax adjustments to close a £20 billion gap. But markets have learned that the details after the speech matter more.
Last year’s October Budget saw an initially calm reaction before the OBR’s verdict on future borrowing triggered a renewed selloff. The pattern repeated an earlier episode when optimistic assumptions failed to match market expectations and gilt yields surged within days.
Nigel Green highlights why scrutiny is so intense: “The UK economy is not expanding rapidly. Services inflation remains sticky, investment has been uneven and household demand is still adjusting to higher financing costs. Investors compare these realities with the OBR’s assumptions immediately.”
International markets amplify this pressure. The US continues to attract global fixed-income flows as its growth outlook outpaces peers. Core European sovereigns have regained stability as inflation normalises. Japan’s shift out of negative rates has drawn long-duration buyers back into its government bond market.
“Capital is mobile, and gilts must compete against all of these alternatives,” warns the deVere CEO.
If traders decide the projections lean too far toward optimistic revenue expectations or an ambitious GDP path, the premium demanded on gilts will rise.
Markets move quickly when confronted with uncertainty around supply and long-term sustainability, and gilts are liquid enough that such shifts become visible worldwide almost instantly.
Nigel Green says the government needs absolute clarity at this juncture. “Investors expect a framework that recognises the economic backdrop as it exists, not as policymakers would like it to be,” he says.
“If the OBR delivers grounded projections presents a funding plan that avoids sudden concentration of issuance, confidence strengthens. When projections are credible, gilt markets respond constructively.”
The consequences extend beyond Westminster. Movements in gilts shape corporate financing conditions, mortgage rates and the balance-sheet dynamics of major pension schemes.
Stability in sovereign debt is the anchor for broader financial stability, making the OBR’s assumptions central to the economic outlook.
The chief executive of deVere adds that a strong outcome can still deliver upside for the UK. “Credible fiscal projections encourage inflows into gilts, support the pound and improve sentiment toward UK assets.”
He concludes: “The moment the OBR releases its tables, the UK enters a global contest for credibility.”