By Geoffrey Smith
Investing.com -- U.K. assets were in freefall across the board on Friday after financial markets reacted negatively to the new government’s plans to cut taxes aggressively in the hope of stimulating growth.
Government bond prices also plummeted, pushing yields to their highest levels in years across the whole of the yield curve, as traders priced in the prospect of much heavier borrowing to fund a budget deficit that is set to widen sharply as a result of tax cuts worth 45 billion pounds and energy subsidies that will cost around 60 billion pounds over the next six months alone.
The benchmark 10-Year Gilt yield, a rough proxy for medium-term inflation expectations, soared another 30 basis points to a new 11-year high of 3.80%. It’s risen over 1.5 percentage points since Liz Truss emerged as the favorite to win the Conservative Party leadership contest. Truss took over as Prime Minister at the start of September.
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