City investors seem to have reacted positively to Andy Burnham’s first major policy speech, with government borrowing costs dipping and the pound rising.
On Monday, Burnham delivered his first major speech outlining his vision for the UK ahead of his seemingly inevitable coronation as the next Labour leader and prime minister.
In the speech, the Makerfield MP promised dramatic devolution powers and a new Downing Street team based in Manchester as part of what he said would be the “biggest rebalancing of power our country has ever seen.”
Burnham promised to redistribute power across the UK in an effort to “drive good growth in every postcode”.
Other pledges included the biggest council house building programme since the post-war period, a “complete rethink” of education and cuts to welfare.
And it seems investors and the City so far see no issue with any of this.
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Following Burnham’s speech, UK gilt yields dipped slightly, the Guardian reported. The interest rate on 30-year UK bonds was down 2 basis points (0.02 of a percentage point), having been up around 1bp before the speech.
Whilst a small move, falling bond yields are usually a sign that investors are more confident to hold a country’s debt.
Sterling also rose slightly during his speech, and by the end of the day was up over a third of a cent against the US dollar to $1.3240.
The main reason for investors not being spooked by Burnham’s vision for the UK is largely down his commitment to stick to Rachel Reeves’s fiscal rules. “the discipline of our current fiscal rules.”
Alex Everett, investment director for rates management at Aberdeen Investments, told the Guardian that Burnham’s “ambition to reduce the UK’s welfare bill” was also a positive sign for investors.
He added: “While the speech was growth-focused, these offsets should provide the gilt market with near-term reassurance that a Burnham government would be mindful of fiscal constraints as well as political priorities.
“With such a focus on investment and improvement spending, the re-affirmation of prudence was welcome at this relatively early stage.”