Bond yields spiked on Friday as the U.K. government cut a host of taxes and for the first time quantified the cost of capping energy bills, saying it will cost £60 billion over the next six months.
The so-called mini-budget speech from Chancellor Kwasi Kwarteng outlined a plan to scrap corporate tax hikes, cut the top rate of personal taxes and lift a cap on banker bonuses.
The yield on the 2-year gilt
TMBMKGB-02Y,
shot up 23 basis points to 3.73%. The yield on the 10-year gilt
TMBMKGB-10Y,
rose 17 basis points to 3.67%, continuing a meteoric ascent from 2.6% not even a month ago.
The pound
GBPUSD,
bounced back, rising above $1.12 from as low as $1.1151, though still near the lowest levels since 1985.
Here are the key provisions.
- Cuts the basic personal tax rate to 19% from 20%, and eliminates the top tax rate of 45%
- Cuts the national insurance hike of 1.25 percentage points from Nov. 6
- Eliminates a planned increase in the corporate tax rate of 25%, keeping the rate at 19%
- First-time buyers will only pay stamp duty on homes above £425,000, up from £300,000
- Freezes taxes on alcohol from February, it what estimates is worth £600 million annually
