FTSE Hits a Five-Month High as Gilts Stay Pinned Near 5 Per Cent
London’s blue-chip index closed at its highest since February, powered by miners and oil majors, even as the government-bond market kept the new administration on a short leash. The FTSE 100 finished at 10,716.97, up 1.24 per cent, and gold hit a record. But ten-year gilt yields held near 5 per cent, still the highest in the G7, and sterling slipped below $1.34 despite the softer June inflation figures.
The split told its own story: the equity rally was a global commodity trade, riding the surge in oil and a record gold price, while the bond market delivered a domestic verdict on Mr Burnham’s talk of fiscal “flexibility”. Analysts said gilt yields could fall by at least 20 basis points if the government sticks to the existing fiscal rules, but a rule change could push the risk premium “materially higher”. ING’s James Smith called the cooler June data “welcome news for the Bank of England hawks” ahead of the rate decision on 30 July. Watch the gilt curve for the market’s read on the Chancellor’s first Budget.