The UK is not about to disappear in a puff of smoke because the Gilts Market is having a minor tantrum. But there is a serious Political Competency premium on Gilts, which will rise when the scale of Labour’s defeat becomes apparent, and the Starmer premiership is up against the wall. Trouble ahead.

When staring down the abyss of looming stagflation, a bond market rout, and a reset on the global economy… let’s try to pretend it’s all something else. Christine Legarde would have made a great French President. Of course it’s not Stagflation... it’s just... Well? What is it?

There is a lot of noise in Gilts these days. The danger is it derails national confidence – even though much of the clamour is twaddle. The reality is all Governments face challenges, but the UK’s Gilts market is much stronger and more resilient that the right-wing press would care to admit.

Chancellor Rachel Reeves should be angry, not tearful. The multiple crises facing the UK’s funding have been long-term in creation. Reeves has the opportunity to fix them. The recipe is simple; common sense, political discipline, a dash for growth and a spicing of Gilts Liability Management. C’mon Rachel… you can do it.

Yesterday the Gilts market suffered a judder moment – but it was political theatre. The gilts market is fundamentally in good shape, well run, and a 3.5 times oversubscribed Gilts auction highlights it’s not under Bond Vigilante pressure. The UK is not about to default, beg an IMF bailout – no matter what Liz Truss apologists would like to believe.

The City of London as the financial centre of global markets has been in terminal decline since 2008. Over-regulation and bureaucracy has doomed it. To restore the UK’s excellence and swashbuckling success in financial markets, we need to embrace risk – not regulate it out the equation.  

Yesterday’s UK’s 15-year Gilt deal was a 15 times oversubscribed blowout success, demonstrating global investors have confidence in the UK’s competence, stability and markets. However, Ray Dalio is writing another book about why countries go bust, and reckons the UK is caught in a debt-death spiral. I doubt it.

Hard Hats to the Ready. Is Elon Musk trying to bring down the UK government by undermining sterling and the Gilts market through lies and disinformation on X? Might sound like conspiracy theory – but that’s what it feels like in the market.

Politics was an overarching theme in 2024 – and, regrettably, will remain so in 2025 as global investors figure out likely policy action by central banks and the growth outlook for 2025. “This time it’s different” (TTID) and FOMO remain the most malign forces acting on asset prices, but is a new full blown European Sov Debt Crisis also on the cards?

Oh, to be a fly on the wall while they wrote the speeches for last night’s Mansion House dinner. The Bank’s Bailey railed against Brexit, while Chancellor Reeves plans to deregulate financial services and refocus UK investment through new Megafunds. What could possibly go wrong?