LONDON, October 20 (Reuters) – UK government bond prices rose on Thursday, although their gains were tempered by the prospect of another week of political upheaval as the Conservative Party chooses a successor to Prime Minister Liz Truss, who announced her resignation.
Investors continued to trim bets on an outsized 1% rate hike by the Bank of England next month. Deputy Governor Ben Broadbent questioned the markets’ aggressive pricing of future rate hikes in a speech Thursday.
20- and 30-year gilt yields, which fell as much as 13 basis points (bps) earlier in the day, fell 7 bps as of 1442 GMT.
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Interest rate futures markets pointed to a 10% chance of a 100 basis point hike in interest rates on Nov. 3 after the next BoE meeting, compared to around 25% earlier in the day.
“The reaction of UK financial markets to Liz Truss’ resignation today has been quite optimistic,” said Daniel Mahoney, an economist at Handelsbanken.
“Moving forward, markets will seek political stability from the UK Government and will now look for a new leader to be chosen both quickly and with a broad consensus of fellow parliamentarians.”
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Reporting by Andy Bruce Edited by William Schomberg
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