As we had predicted beforehand, the Office for Budget Responsibility’s assessment that the Chancellor will break his debt rule did not prompt government bond yields to rise. Indeed, both gilt yields and the cost of default insurance have held steady over the last month. And while the spread of gilt yields over interest rate expectations has risen, this seems to have reflected a further fading of expectations that the Monetary Policy Committee (MPC) will undertake more asset purchases in the coming months, rather than growing concerns about the health of the public finances.
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