The OBR’s budget verdict is important, but the bond market’s reaction is truly key

4 hours ago7 min read

The countdown to Chancellor Rachel Reeves's autumn budget has entered its final, critical phase, with less than three weeks remaining until its unveiling. The City of London, that great barometer of financial confidence, is holding its collective breath, its focus sharpening on the dual verdicts that will ultimately define this government's fiscal credibility: the official assessment from the Office for Budget Responsibility (OBB) and the far more visceral, immediate reaction of the global bond markets.While the OBR's forecast on Monday will provide the essential, technocratic scaffolding—quantifying the widely anticipated £30bn fiscal black hole and projecting the costs for growth, inflation, and living standards—it is the gut response from gilt traders that will truly signal whether the Treasury's numbers are deemed credible. This is the high-wire act that defines modern chancellorships; one can pass the OBR's test with flying colours yet still be punished by the market if the narrative fails to convince.The challenge for Reeves is profound, navigating a financial ecosystem that often harbours a simplistic and misplaced bias towards deep welfare cuts as a primary lever for fiscal repair—a dangerous orthodoxy that, if indulged, could condemn the British economy to a worse long-term trajectory by stifling demand and exacerbating social inequalities. The ghost of the September 2022 mini-budget, which triggered a catastrophic sell-off in UK government debt and a spike in borrowing costs, looms large over these proceedings.That episode was a brutal lesson in market power, demonstrating that political ideology, when untethered from economic plausibility, can be eviscerated in hours by the cold calculus of international investors. Reeves's team is undoubtedly running the numbers not just through the OBR's models, but through the lens of potential market reception, stress-testing every revenue-raising measure and spending commitment against a spectrum of investor sentiment.The stakes could not be higher; a positive reception could solidify her authority, lower government borrowing costs, and create a virtuous cycle for public investment, while a negative one could trigger a vicious spiral of higher debt servicing, forced austerity, and a loss of hard-won economic credibility. The coming weeks will reveal whether the Chancellor can successfully keep the City onside while steering the UK economy toward a more stable and equitable future, a task requiring not just arithmetic precision but a masterful command of financial storytelling.

#lead focus news

#UK budget

#bond market

#OBR forecast

#fiscal policy

#Rachel Reeves

#welfare cuts

#economic outlook

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