This is an audio transcript of the FT News Briefing podcast episode: ‘UK bond market wades through Budget uncertainty’
Victoria Craig
Good morning from the Financial Times. Today is Monday, November 17th, and this is your FT News Briefing. Goldman Sachs has taken the deals world by storm this year. Plus, we look at why the British government’s Budget is sending fresh worry through bond markets. And we’ll wade through the issues the US government shutdown has posed for reliable data collection in America.
Myles McCormick
The more we shift to a disparate mosaic of private data, it just leaves a more broken up picture of the economy.
Victoria Craig
I’m Victoria Craig, and here’s the news you need to start your day.
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Goldman Sachs is on track to capture its biggest share of the global deal market in almost a quarter century. Though it was a slow start, 2025 has been the busiest period for mergers and acquisitions since the pandemic boom of 2021. That’s in part due to the Trump administration’s increasingly laissez-faire attitude toward big corporate tie-ups. And Goldman has been involved in some of the biggest deals, including the most lucrative transaction in the bank’s history.
This quarter, it secured a $110mn fee for advising Electronic Arts on its take-private deal. All of that has helped push Goldman’s share price to record levels. However, while it advised on 34 per cent of the value of all deals, it won’t get anywhere close to a third of the fees. That number looks closer to 10.7 per cent, which is still strong by historical standards.
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Setting a budget is difficult for individuals, households, and increasingly for the British government. Chancellor Rachel Reeves latest plan has been swept up in controversy after controversy over the past few months, and she hasn’t even formally presented it yet. That will come on November 26th, but on Friday, Reeves ditched a portion of her plan that would’ve raised income taxes, citing an improved fiscal forecast.
Investors didn’t take that as a positive change and sold off government bonds. There are also questions about how much politics has played into Reeves’ change in strategy. So what’s the mood like in markets heading into a new week? Tommy Stubbing, the FT’s markets news editor, is here to look into the crystal ball.
Hi Tommy.
Tommy Stubbington
Hi there.
Victoria Craig
So on Friday, the sell-off in UK government debt was the worst since the summer. Where are markets standing now?
Tommy Stubbington
Well, I think the first thing to note here is that this was a pretty bad day for the gilt market. But really, I mean, it’s just the latest in a series of big sell-offs in the gilt market around this idea that there’s too much borrowing, that the government policy is headed in the wrong direction, and that gilt investors are getting increasingly nervous about the amount that the UK government needs to borrow in order to fund its day-to-day spending.
Victoria Craig
So the concern around this decision by the chancellor seems to be quite a complicated one. Just walk our international listeners through why Reeves did this in the first place.
Tommy Stubbington
I mean, essentially, what happened was the government received a slightly rosier picture about the outlook, and that meant that this income tax raise was suddenly decided not to be necessary.
Also, I should say that this had faced quite a lot of political opposition within the Labour party. Bear in mind, the basic rate of income tax hadn’t been raised since the 1970s. It also would’ve overturned a pledge in Prime Minister Keir Starmer’s election manifesto from last year. So this was something difficult that they were going to have to do, that suddenly they thought, well, maybe we don’t need to do this, so let’s try and take a political win and scrap that decision.
Investors had been banking on this new tax revenue to help plug this big gap in the public finances, and suddenly it’s not there. Now that money will be raised through other means. That’s what the government is kind of currently briefing.
Victoria Craig
And if we look at that market reaction, I think there are always comparisons made to the gilt market sell-off that happened during former prime minister Liz Truss’s very short time in office, which was also sparked by budget outrage. Are we at that level here?
Tommy Stubbington
That context is very, very important. It’s only three years since we saw a prime minister basically get thrown out by the bond market. Now, I think the good news for Starmer and Reeves at the moment is no, we’re not at that level. We’ve seen a series of episodes where the bond market has become very, very nervous about the level of borrowing.
We’ve seen gilt yields rise very sharply in kind of short order. But in terms of the level, I mean we’re only back to the level on the 10-year gilt yield, the benchmark for borrowing that we saw in the middle of October. We are well below the kind of heights that we saw earlier in the year. This is not a Liz Truss situation at this point.
Victoria Craig
Yeah. And we still have a week and a half to go until Reeves does present that Budget formally. As we learn during the Truss era, I think a week and a half seems like an eternity. So is there a sense of what investors will expect Reeves to do or want Reeves to do to alleviate some of this nervousness in the bond market?
Tommy Stubbington
At the risk of peering into my crystal ball here, I don’t think we’re in a situation where you have a kind of self-fulfilling market sell-off where the government urgently needs to do something in order to arrest a downward spiral. I don’t think we’re there. I suspect we’ll kind of hit a new equilibrium unless there’s more bad news for investors to swallow.
Now, so I think it’s really just a case for the government now of getting through the next week and a half and getting through the Budget without confronting investors with any more nasty surprises.
Victoria Craig
Plenty to keep you busy over the next week or so. Tommy Stubbington is the FT’s market news editor. Thanks for your time.
Tommy Stubbington
Thanks very much, Victoria.
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Victoria Craig
Spain is pulling off something we haven’t seen in almost two decades. Next year, it’ll run a smaller budget deficit than Germany. It’s a striking shift for a country that was once one of the biggest casualties of the Eurozone crisis, and it now finds itself on a healthier fiscal path than Germany and France. The very countries that once stepped in to stabilise the bloc.
Strong economic growth, higher tax revenues, and steady public spending have helped Spain shrink its deficit for five straight years. By next year, the Bank of Spain says it’ll fall again to just 2.3 per cent of GDP. Meanwhile, Germany’s deficit is moving in the opposite direction, rising closer to 4 per cent as Berlin ramps up infrastructure and defence spending after years of under-investment.
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Things have become a bit messy in the world of US economic data. The longest-running government shutdown, which lasted 43 days is over. And while federal workers are back in their posts, not all things are back to normal, namely our window into the health of the American economy through critical government data collection. Myles McCormick, the FT’s US economics correspondent, has been digging into this one for us. Hi Myles.
Myles McCormick
Hi Victoria.
Victoria Craig
So let’s start with a shutdown. Why has that affected the ability to release reports like the Consumer Price Index or even the Monthly Jobs Report?
Myles McCormick
So during the shutdown, there were hundreds of thousands of government employees that were furloughed, and among those were employees at certain agencies that are in charge of putting together government statistics.
So for the duration of the shutdown, they were unable to come to work and put together these key reports that give us an insight into the health of the US economy. But the problem is that not only were they not able to put out reports during this period, they were unable to collect the data needed to compile these reports. And some of these they can compile retroactively and just put out the reports late.
But for some of this data, actually getting it after the fact becomes a problem. For things like inflation data, they would send employees into grocery stores to check the price of things. For things like employment or unemployment statistics, they’d be calling people up and asking them their work status. It’s very hard to do that retroactively.
Victoria Craig
And this, of course, then leaves a hole in the US data picture for the first time ever. And that’s important to the Federal Reserve. Which uses that data to make its policy decisions. I guess the good thing is that we are gonna get a little picture of some of that delayed data this week, aren’t we?
Myles McCormick
We are. So this week we are expecting the first of the delayed reports to come out and that is information on the September labour market, which will give some information to the Fed as it weighs up what to do when it meets next month to make a decision on interest rates.
But it will still be flying blind to some extent. It’s unlikely to have October information for inflation on the labour market And it may or may not have information for the month of November. So that is going to exacerbate the schism that exists in the Fed at the moment, where some policymakers want to cut rates and cut them quite drastically. As Fed chair Jay Powell said following the last meeting, when you’re in fog, you slow down the car. You don’t make decisions too quickly. It’s very much up in the air what decision the Fed makes when it meets in December.
Victoria Craig
And there had been all of this talk over the last 40 some odd days that we could simply rely on private data collection from big banks and other agencies to sort of fill in these information gaps. But is that a reliable source? Are the surveys as comprehensive and trustworthy, importantly, as the ones that we’re used to getting from the US government?
Myles McCormick
This shutdown is kind of the latest blow to the reliability of these official federal statistics in a scenario where a lot of the agencies that produce them have lost resources, they’ve lost elements of their workforce and they’ve had to downsize big time. And there’s been a lot of politicisation of the work they do. And there is an argument as you say, that, well, why don’t we just shift to privately provided data. But the concern there is that in some cases, the official government statistics have been the gold standard when it comes to measuring the health of the economy.
The more we shift to a disparate mosaic of private data, it just leaves a more broken-up picture of the economy, which will affect everything from policy decisions and from the Fed to even elections.
Victoria Craig
Never a dull moment in the US economy. Myles McCormick is the FT’s US economics correspondent. Thanks for your time.
Myles McCormick
Thanks, Victoria.
Victoria Craig
Before we go, families in the northern UK city of Leeds will soon be getting an unusual package in the mail. It’s neither bills nor holiday catalogues, but rather lead testing kits. It’s the country’s first screening study for lead poisoning that targets hidden exposure in children, and it comes after the government said it is reconsidering routine testing after the FT’s Untold podcast called Toxic Legacy revealed the extent of lead contamination across the UK in everything from drinking water to soil.
The UK, unlike many other advanced economies, has no programme to monitor lead exposure. But if the pilot programme works, it could lead to nationwide screening and bring a long-overlooked public health risk into the spotlight. You can catch up on the Toxic Legacy series and read more on all of the stories in today’s show for free when you click the links in our show notes.
This has been your daily FT News Briefing. Now with some snazzy new artwork in your podcast feed, be sure to give that a gander and as always, check back here tomorrow for the latest business news.