UK borrowing costs have fallen after huge market volatility in anticipation of Chancellor Rachel Reeves's Budget, adding further pressure to the Labour Government and its handling of the economy.
The 10-year gilt dived to 4.426 per cent, before rapidly hiking to over 4.5 per cent ahead of the Chancellor's reforms, which are expected to include an extension to the existing tax threshold freeze.
Just minutes before the budget, the market dived once more before hiking to 4.533 per cent as Government borrowing soared suddenly, following the release of the Office for Budget Responsibility (OBR) document 90 minutes ahead of schedule.
The gilts have now fallen sharply to 4.45 per cent, from a starting of 4.525 per cent at 8am this morning, as investors grow in confidence.
This comes after weeks of speculation that the Labour Government would break its manifesto pledge to raise tax on "working people" to bolster the Treasury's coffers.
It's widely expected Ms Reeves will extend the existing freeze on HM Revenue and Customs (HMRC) thresholds until at least 2030 in what many consider to be a stealth tax.
10-year gilt yields, which are used the benchmark for the return the Treasury promises to buyers of its debt, jumped slightly in early bond market trading prior the statement.
This adds further pressure to the Chancellor, who has previously cited that £1 in every £10 of taxpayer money is spent on paying interest payments on UK debt.
Ahead of Ms Reeves's statement, Darren Jones, the chief secretary to the Prime Minister, claimed the Budget will "help tackle the cost of living", slash NHS waiting list times and reduce Britain's debt burden.
However, Mr Jones admitted that the UK's benefit expenditure at its current level was no longer sustainable for the Government.
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Figures from the Office for National Statistics (ONS) found public borrowing came to £17.4billion in October 2025, which is the difference between public spending and income.
While this was £1.8billion, or 9.6 per cent, less than October 2024, it represents the third-highest October borrowing since monthly records began in 1993, after those of 2024 and 2020.
Overall borrowing in the financial year to October 2025 was £116.8billion which was £9billion more than in the same seven-month period of 2024 and the second-highest April to October borrowing on record.
Gilts have now dropped sharply again to 4.506 per cent as of 12:20pm (GMT), as markets have been sent into complete chaos after the unprecedented Budget leak.
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Gilts have fallen now sharply amid huge volatility
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Gilts are UK Government bonds, and their yields directly determine how expensive it is for the Government to borrow.
When gilt yields rise, the Treasury faces higher debt servicing costs; when they fall, borrowing becomes cheaper.
The gilt market is therefore widely seen as the 'reality check' on fiscal policy. If investors lose confidence in fiscal policy, gilt yields can spike sharply, often forcing Governments to change course.As of 12:40pm, the gilts were at 4.536 per cent, as markets jolted up once more, before falling to 4.45 per cent at 13:28pm.