Policy U-turn lifts pound, bonds

The British pound and government bonds extended gains yesterday after new finance minister Jeremy Hunt said earlier that the government would reverse almost all of the tax changes announced in Prime Minister Liz Truss's economic growth plan three weeks ago.

The pound rose as much as 1.4 percent to US$1.1331 (HK$8.8701), outperforming other Group-of-10 peers, while the yield on 30-year gilts fell as much as 44 basis points to 4.34 percent - the second biggest drop on record on a closing basis.

In scrapping tax-cut proposals, Chancellor of the Exchequer Hunt also signaled that consumers would shoulder more of the increase in energy prices from next April.

The overhaul adds to the series of U-turns by Truss following the negative market reaction to her initial "mini-budget: proposals.

The government faced additional pressure to restore investor confidence in public finances now that the Bank of England's emergency bond-buying operations - a backstop to the market - have ended.

"The chancellor's emergency statement should help restore some much-needed market confidence after an extraordinary fortnight of volatility," said Dermot O'Leary, chief economist at investment bank Goodbody.