Aberdeen Group says rising gilt yields squeeze UK fiscal headroom ahead of Budget
TLT•Aberdeen Group says higher gilt yields have cut UK fiscal headroom from £23.6 billion in March to an estimated £8.5 billion–£16 billion. The 10-year gilt yield reached around 5.4% at September’s end, while planned gilt sales total around £246 billion this financial year.
1. Yields pressure headroom
Aberdeen Group says rising gilt yields have eroded fiscal headroom from £23.6 billion in March to an estimated £8.5 billion–£16 billion. The 10-year gilt yield reached around 5.4% at September’s end, roughly half a percentage point above a year earlier, and each quarter-point increase cuts the Chancellor’s headroom by around £2.5 billion–£4 billion.
2. Budget and gilt sales
UK gilt yields could fall if the October 28 Budget delivers credible fiscal headroom, avoids unfunded giveaways and maintains predictable financing. Planned gilt sales total around £246 billion this financial year, while a shift toward shorter maturities increases refinancing exposure.
