Click here for our initial response to yesterday’s budget from a fixed income and currency point of view.

In summary we believe that the measures to cut spending and increase taxes had largely been anticipated by investors, however they will act to ease fears and remove many uncertainties – and be welcomed by the ratings agencies. Gilt issuance is to be cut next year and while the market had been forecasting that the reductions would be focused on medium and long-dated bonds as well as index-linked gilts, the reduction is spread across the yield curve. For sterling, we believe the UK currency will remain weak for some time – while tighter fiscal policy is positive for sterling, loose monetary policy continues to act as a counterbalance.