High above the London skyline in Canary Wharf, the atmosphere on a trading floor was one of cautious anticipation ahead of the Chancellor's budget announcement. That calm was briefly shattered by an unexpected leak that sent traders scrambling.
Chaotic Start as OBR Forecasts Leak Early
The carefully orchestrated budget day was thrown into disarray when the Office for Budget Responsibility's detailed analysis appeared on computer screens across the City of London. The 200-page document was released prematurely, triggering immediate activity among financial professionals.
Will Marsters, a sales trader at trading platform Saxo UK, where The Guardian observed the proceedings, captured the moment perfectly. The accidental release prompted both a rapid analysis of the figures and some amusement at the forecaster's misfortune.
Markets Weather the Storm Without Major Upset
For the Treasury and investors, the crucial test was how currency and bond markets would respond. The Labour government was particularly keen to avoid a repeat of the Liz Truss 'mini-budget' debacle in 2022, which caused borrowing costs to surge and ultimately led to a change in government.
The reaction on Wednesday was volatile but ultimately reassuring. The yield on the benchmark 10-year gilt, which indicates the government's cost of borrowing, experienced swings. It initially dropped from 4.5% to approximately 4.42%, then climbed back above 4.52%, before settling at 4.4% by late afternoon.
This overall decline in borrowing costs throughout the day will likely be seen as a positive outcome for Chancellor Reeves. It suggests that markets do not perceive lending to the UK as significantly riskier following the budget.
Traders Express Relief at Tempered Forecasts
Neil Wilson, an investor strategist at Saxo UK, summarised the mood, stating there was no great stinging surprise that has upset markets, allowing for a sense of relief. He did, however, question the long-term credibility of forecasts that promise fiscal restraint in later years, especially with future elections on the horizon.
The pound also experienced a volatile journey. After an initial jump following the OBR leak, it fell to $1.3124, before recovering to $1.3229 by late afternoon, marking a 0.5% increase for the day.
Mike Owen, another sales trader, echoed the sentiment of many, noting that everyone was fearing the worst, so the subsequent market movements felt like a collective phew as the budget details were absorbed without major disruption.
