Muddle-through budget supports the case for lower Gilt yields

The Gilt market is breathing a sigh of relief after the much-anticipated UK budget announcement today delivered less bad news than feared and the Chancellor appears to have, so far, come out of a fraught fiscal process a bit stronger. While fiscal policy will not be tightened by as much as we had expected, and there is a still a risk that political developments take a turn for the worse, we remain comfortable with our forecast that the 10-year gilt yield will fall a bit further, from ~4.40% currently to 4.25% by end-2026.