UK bonds extended gains after the news of Sunak’s election

On the 24th local time, the results of the British ruling Conservative Party leadership election were released. Former Chancellor of the Exchequer Rishi Sunak, as the only candidate, was automatically elected as the new leader of the British Conservative Party. This will also be the first Asian Prime Minister in British history.

Just last night, former British Prime Minister Boris Johnson issued a statement announcing his withdrawal from the Conservative Party leadership race, becoming the biggest turning point in this election. After the highly-voiced Johnson withdrew, Sunak, who has announced his candidacy, has greatly increased the probability of becoming prime minister.

British government bonds extended gains after the news of Sunak’s election, with the 10-year bond yield falling 27 basis points to 3.78%.

The UK 30-year bond yield fell to 3.76% at one point, below its Sept. 22 close.

Image

Judging by the performance of the bond market, investors hope that Sunak can restore credibility to economic decision-making and help stabilize Britain’s volatile markets.

In addition, according to the British Sky News on the 24th, Sunak delivered a speech at the British Conservative Party headquarters that day. Sunak reportedly began his speech by praising Truss, saying she “dedicated herself to the public service” of the country under “extremely difficult circumstances” and said that being elected prime minister was “the greatest honor of my life”.

Second generation of Indian immigrants

Sunak was born in Southampton, England, in 1980 to Indian immigrants. His father worked in medicine and his mother ran her own independent pharmacy, thus providing him with good financial conditions. The BBC said that Sunak received a British aristocratic education. He studied at Winchester, one of the most expensive boarding schools in the UK, and then entered Oxford University to study philosophy, politics and economics, and then at Stanford University. Obtained a master’s degree in business administration.

In 2015, Sunak entered the political arena after being elected to the Conservative Party. He became the British Chancellor of the Exchequer on February 13, 2020. At the age of 39, he became one of the youngest Chancellors of the Exchequer in British history. On July 5, 2022, Sunak announced his resignation from the government after losing confidence in the leadership of then Prime Minister Boris Johnson.

Sunak lost 14% of the vote to Truss in the last Conservative Party leadership election.

The victory of the Conservative Party leader this time also means that Sunak will become Britain’s fifth prime minister in six years.

or face many challenges

Currently, the UK is struggling with higher inflation, a deteriorating economy and political instability.

From April to July 2022, inflation in the UK hit a record high in 40 years, and the consumer price index (CPI) in September rose by 10.1% year-on-year, reaching the highest level in nearly 40 years.

Ian Berg, a professor at the Institute of European Studies at the London School of Economics, pointed out that a series of events in the past few months have shown great divisions within the Conservative Party: “Change prime ministers, change ministers, make decisions and then withdraw quickly, British politics There’s a farce going on… that’s not what government should be like.”

Next, Sunak will lead this severely divided country to move forward hard. The United Kingdom is currently facing a serious energy crisis, economic crisis, and political crisis. Therefore, he must first restore stability to this turbulent country.

The outside world noticed that Sunak made it clear that curbing inflation was a top priority, promising to “fix the economy.” Andrew Goodwin, chief UK economist at Oxford Economics, said that in terms of market impact, the new prime minister is unlikely to risk angering the market again, such as by seeking tax cuts or increased public spending, but will continue to implement the incumbent Fiscal austerity policy proposed by the Chancellor of the Exchequer.

Goodwin noted that the coherence of economic policy is likely to be clarified in the latest round of fiscal announcements on October 31. But it’s also bad for the UK economy. “The tax burden will now be higher than previously expected, putting more pressure on households whose real incomes have fallen. With the economy facing a recession, tax increases and public spending restrictions have the potential to make the economy even weaker. “