Analyst: Fiscal room should be able to reassure the UK sovereign bond market in the short term

Ebury analyst Matthew Ryan stated in a report that the UK government announced in Wednesday’s budget that fiscal headroom has recovered, which should be sufficient in the short term to meet UK gilt market expectations. Ryan said: “However, with fiscal headroom at around 0.4% of GDP, it remains relatively low by historical standards and does not fully eliminate market concerns about the possibility of further tax increases before the next fiscal policy adjustment.” UK Chancellor of the Exchequer John Healey said that fiscal headroom for the 2029-2030 financial year is expected to be £1.5 billion, whereas prior to the announcement, the market had expected a range of £1 billion to £1.2 billion.