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Will PM Sunak usher in a period of calm after the storm?

Given all the turbulence in the UK’s government bond market over the past month or so, the limited reaction to today’s news that Rishi Sunak will be its next prime minister (PM) may seem surprising. However, it is presumably because much of the extra risk premia on Gilts that emerged during his predecessor’s short-lived reign had already unravelled. Our best guess is that Sunak’s leadership will usher in a period of calm after the recent storm, with tighter fiscal policy than he envisaged when he was the Chancellor. Yet we would be surprised if Gilts rallied much more, given the prospects for interest rates amid sticky inflation.    

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