Andy Burnham, the Mayor of Greater Manchester, cancelled a scheduled call with hedge fund leaders at short notice this week. The discussion was set to focus on 'bond market pressure', according to the Financial Times. The call was hosted by Signum Global Advisors and cancelled due to a scheduling conflict, though it is expected to be rearranged.
Burnham, who is reportedly considering a Labour leadership bid if he wins a by-election, has been viewed by financial markets as potentially less fiscally conservative than other candidates. This perception matters because bond markets often sell UK gilts when they lose confidence in fiscal policy, driving up yields and increasing government borrowing costs.
Burnham previously stated that the UK must move 'beyond being in hock to the bond markets', but later clarified his remarks. At the launch of his by-election campaign, he said he meant the UK should not give up control of the fundamental drivers of the economy over the long term.
Chancellor Rachel Reeves has implemented several tax and fiscal changes over the past 18 months to reduce debt as a share of GDP. However, her efforts have been hampered by high inflation, sluggish economic growth, and rising energy costs due to the Iran war, which may fuel further inflation.
Separately, Bank of England Governor Andrew Bailey stated that the sell-off of bonds would continue for one to two years as the central bank reduces its balance sheet. The BoE has already cut its balance sheet from £1 trillion to £650 billion, partly by offloading government bonds bought during the Covid crisis. Bailey noted that another £100-200 billion could be shed.
