Rolling coverage of the latest economic and financial news UK government borrowing costs are dropping this morning, a welcome sign ahead of Wednesday’s budget. The yield (or interest rate) on 10 and 30-year UK gilts have both dropped by around three basis points (0.03 of a percentage point) this morning. Issuing loans to public financial institutions creates a financial asset that offsets the increase in outstanding government debt. If the investments that the PuFins make generate sufficient returns for the PuFins to repay their government loans, then long term debt sustainability is little affected. Limited transparency and the risk that the PuFins may suffer impairments on their investments will probably make bond market investors skeptical of the extra gilt issuance. Chancellor Healey should avoid a big increase in gilt issuance to fund such intra-public sector lending. Nebius, CoreWe
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