Burnham tries to calm bond market fears as sell-off threatens crucial first budget

Prime Minister Andy Burnham attempted on Wednesday to reassure investors amid a sell-off of government bonds that threatened to undermine his government's first budget. The sell-off occurred as borrowing costs surged, potentially compromising the new budget's spending capacity. Burnham, speaking at prime minister's questions, pledged that decisions would be "grounded in fiscal responsibility."

This statement came after a series of bold promises made to parliament the previous day, including greater public control of utilities, interventions on the cost of living, and increased defence spending. Despite gaining support from Labour MPs, Burnham faced criticism for exacerbating market instability. His former economic adviser, Jim O'Neill, deemed the market turmoil as "the last thing" needed.

Inflation, soaring deficits, and funding demands from tech companies were cited as factors driving investors to dump government bonds. Consequently, borrowing costs soared, with 10-year yields peaking at 5.29%, the highest since 2008. The Office for Budget Responsibility (OBR) and the chancellor, John Healey, will base their budget forecasts on bond yields from several weeks prior to the budget announcement.