Latest news with #governmentborrowing
Washington Post
a day ago
- Business
- Washington Post
GOP bill could worsen inflation and lead to financial crisis, economists warn
The boost to the national debt from President Donald Trump's sweeping tax bill could add fresh fuel to inflation just as his tariff policies are already pushing prices up, a range of mainstream economists are warning. Those concerns echo worries among lawmakers — and fierce criticism from erstwhile Trump adviser Elon Musk — that the measure would cause too much new government borrowing.
Irish Times
30-05-2025
- Business
- Irish Times
The bond vigilantes are on the prowl
The bond vigilantes are growling and baring their teeth, and authorities around the world (most of it, anyhow) are doing the right thing, and backing away. But the risk of bond wobbles spiralling into a broader outbreak of nerves across markets is high. From the US to the UK and Japan, bond investors are making it clear they are unwilling to be used as a low-cost cash machine for government spending forever. The circumstances for each country vary but the underlying force is the same: the world has changed. Inflation is higher, central banks are not soaking up bonds as they once did, and yet governments still want to borrow like it's going out of fashion. Now, bond investors want to be rewarded properly for the risks. The UK's head of debt issuance, Jessica Pulay, said she would lean more heavily on short-term debt to meet the country's financing needs, because borrowing costs on debt with a longer shelf life have become uncomfortably high – the effect of weaker investor demand. READ MORE If bond prices deteriorate further, analysts reckon the Bank of England could pull back on sales of debt that it accumulated after the Covid crisis. In Japan, it is a similar story. Long-term borrowing costs raced higher last week after domestic investors, stung by unusually high inflation expectations and painfully high market volatility, baulked at continuing to absorb debt maturing far out into the future. Thirty-year yields shot to more than 3 per cent – their highest point in decades, reflecting a steep decline in the price of the bonds. This is high drama in a national bond market known as a cure for insomnia. Again, the ministry of finance has restored a fragile calm only, reportedly, by suggesting that it too might skew new debt issuance on to the shorter term, so investors feel like they are taking on lighter risks. [ US economy fast becoming Trump's Achilles' heel Opens in new window ] In the US, the big thumbs down from the bond market came in the immediate aftermath of Donald Trump's poorly-received so-called 'reciprocal' tariffs in April. With conspicuous timing, the president brought in a 90-day pause after the usual foreign buyers sat on their hands and refused to buy in to a normally rather routine auction of three-year debt. As Trump himself said, the bond market had become 'yippy'. Last week, the bond market struck again, providing patchy support to fresh 20-year debt from the US treasury. The dollar dropped and bond prices fell in response – an alarming indication that investors are backing away from US risk at a time when the White House is seeking to pass a spending package that adds over $3 trillion (€2.65 trillion) to government borrowing over the next decade. 'Ultimately, there are only two 'solutions' to this problem: either the US has to sharply revise the reconciliation Bill currently sitting in Congress to result in credibly tighter fiscal policy; or, the non-dollar value of US debt has to decline materially until it becomes cheap enough for foreign investors to return,' concludes Deutsche Bank's George Saravelos. 'Brace for more volatility.' One reliable truism in markets is that deficits don't matter until they do. Well, now they do. Some context is useful here. Investors are not allergic to all borrowing. It is worth noting that Europe is spared this kind of hand-wringing, at least for now, as higher levels of borrowing, especially in Germany, are likely to stimulate growth while a stronger euro, buoyed by a search for alternatives to the dollar, will help keep inflation under control. [ From crypto to private jets: How Donald Trump and his family have profited from the US presidency Opens in new window ] In addition, we are not even close to panic stations yet. 'Oh no, here we go again,' laments Dario Perkins at TS Lombard. 'If you are a macro doomster, there is no level of yields that will keep you calm,' he writes. When yields fall, investors fret they are a signal of an impending recession. When they rise as they are now, he said, the mood shifts to 'OMG fiscal crisis!' – a sentiment Perkins does not fully share. This is a fair point. But it is clear that, for a host of reasons in a number of key markets, bond investors' patience is wearing thin, and the danger is that this leaks in to other asset classes. Why bother buying stocks when bonds offer such generous returns? US stock markets, hopped up on demand from retail investors, are not reflecting this risk yet. But this year has taught us that sentiment can switch at speed. Do not be surprised if the snarling bond vigilantes take the blame for the next vibe shift. – Copyright The Financial Times Limited 2025
The Independent
22-05-2025
- Business
- The Independent
UK government borrowing rises to £20.2 billion as pressure mounts on Rachel Reeves
UK government borrowing surged to £20.2 billion in April, exceeding forecasts and raising concerns about Chancellor Rachel Reeves 's ability to meet her fiscal targets. This marks the fourth-highest April borrowing figure on record, a £1 billion increase compared to the same period last year, according to the Office for National Statistics (ONS). Public sector net borrowing, the difference between government spending and income (primarily tax receipts), significantly overshot analyst predictions of £17.6 billion. This poses a challenge for Reeves, who aims to balance day-to-day spending with revenues by 2029-30 while simultaneously improving public services and boosting economic growth. Several factors contributed to the increased borrowing, including rises in public sector pay, national insurance payments, and higher benefit and state pension payouts. Central government spending on goods and services also saw a substantial year-on-year increase of £4.2 billion, reaching £37.9 billion, driven by April pay rises and inflationary pressures. Meanwhile, social benefits paid by the state rose £1.3 billion to £26.8 billion after inflation-linked rises in many benefits. Public sector net debt was estimated at 95.5 per cent of UK GDP (gross domestic product) at the end of April 2025, meaning the proportion of debt was 0.7 percentage points higher than a year earlier and remains at levels last seen in the early 1960s. Deputy director for public sector finances at the ONS Rob Doody said: 'At £1 billion higher than the same time last year, this April's borrowing was the fourth highest for the start of the financial year since monthly records began more than 30 years ago. 'Receipts were up on last April, thanks partly to the higher rate of national insurance contributions. 'However, this was outweighed by greater spending, due to rising public services' running costs and increases in many benefits and state pensions.' On Thursday, the ONS also revised down its borrowing figure for the latest fiscal year, to March 2025, by around £3.7 billion to £148.3 billion after receiving more information on tax receipts. It was still around £11 billion above the forecast set by the Government's official forecaster, the Office for Budget Responsibility. Chief secretary to the Treasury Darren Jones said: 'After years of economic instability crippling the public purse, we have taken the decisions to stabilise our public finances, which has helped deliver four interest rate cuts since August, cutting the cost of borrowing for businesses and working people. 'We're fixing the NHS, with three million more appointments to bring waiting lists down, rebuilding Britain with our landmark planning reforms and strengthening our borders, delivering on the priorities of the country through our plan for change.'
Times
22-05-2025
- Business
- Times
UK public borrowing tops £20bn in blow for Rachel Reeves
Government borrowing rose more than expected last month on the back of higher public sector spending and pay awards, dealing another blow to the chancellor before next month's spending review. The Office for National Statistics (ONS) said a measure of public sector net borrowing grew to £20.2 billion, exceeding a forecast of £17.9 billion made by economists. April's figure is higher than the £19.2 billion recorded in the same month last year. The UK's debt-to-GDP ratio hit 95.5 per cent, up by 0.7 percentage points over the same period last year. The budget deficit, which measures the difference between the government's spending and tax revenues, reached £70.3 billion last month, almost £10 billion higher than projections from the government's fiscal watchdog. Total government borrowing was
Yahoo
22-05-2025
- Business
- Yahoo
UK government borrowing hits £20.2bn in April
Government borrowing came in higher than expected in April, official figures showed, despite an increase in employer national insurance contributions coming into effect last month. Borrowing — the difference between spending and income from taxes — came in at £20.2bn in April, which was up £1bn from the same month last year, according to the Office for National Statistics (ONS). This was also higher than the consensus forecast of £17.9bn, according to Capital Economics. "April's public finances figures showed that despite the boost from the rise in employers' national insurance contributions (NICs), the fiscal year got off to a poor start," said Ruth Gregory, deputy chief UK economist for Capital Economics. "This raises the chances that if the chancellor wishes to stick to her fiscal rules, more tax hikes in the autumn budget will be required." Chancellor Rachel Reeves announced that an increase in employer NICs in her first autumn budget in October, which kicked in last month. The ONS said that borrowing for the financial year ended in March was estimated at £148.3bn, which was £3.7bn lower than its initial estimate published last month. That figure was £11bn more than the £137.3bn predicted by the UK's official forecaster, the Office for Budget Responsibility (OBR). Rob Doody, deputy director for public sector finances at the ONS, said: "At £1bn higher than the same time last year, this April's borrowing was the fourth highest for the start of the financial year since monthly records began more than 30 years ago. "Receipts were up on last April, thanks partly to the highest rate of national insurance contributions. However, this was outweighed by greater spending due to rising public services' running costs and increases in many benefits and state pensions." Read more: More interest rate cuts in doubt after surprise inflation surge The ONS said the UK's current budget deficit — which refers to borrowing to fund day-to-day public sector activities — in the financial year ended in March was estimated to be £70.3bn. This figure was £4.3bn lower than its initial estimate released last month and £9.6bn more than the £60.7bn forecast by the OBR. Public sector net debt, excluding public sector banks, was estimated to be 95.5% of the UK's gross domestic product (GDP) at the end of April and remained at the highest level since the early 1960s. Darren Jones, chief secretary to the Treasury, said: "After years of economic instability crippling the public purse, we have taken the decisions to stabilise our public finances, which has helped deliver four interest rate cuts since August, cutting the cost of borrowing for businesses and working people." Read more: What are Trump's guests getting from $148m crypto dinner? Best credit card deals of the week, 21 May Rachel Reeves rules out cutting ISA limit but remains vague on cash savingsSign in to access your portfolio
