Overview
- The ONS reported February public sector borrowing of £14.3 billion, the second-highest February on record, taking year-to-date borrowing to £125.9 billion and broadly tracking OBR projections.
- February’s deficit was swelled by about £13 billion of debt interest, reflecting RPI-linked gilt costs and the timing of payments that slipped from January.
- The 10-year gilt yield traded near 4.93% on Friday, the highest since 2008, while two-year yields climbed toward 4.51% after intense selling in short-dated debt.
- The Bank of England kept rates on hold at 3.75% but signalled it must respond with hikes if the energy shock endures, prompting markets to price in increases this year.
- Rising yields are set to erode Reeves’s roughly £23.6 billion of fiscal headroom, with analysts warning of multi‑billion reductions as calls grow for energy-bill support.