UK bonds sell off after income tax U

Chancellor Rachel Reeves' earlier income tax hints had kept bonds in check

UK government bonds sold off sharply on Friday morning, as markets recoiled from the government’s decision to row back on plans to plug much of its multibillion-pound black hole with a manifesto-busting income tax hike.

The yield on 10-year gilts – the common benchmark for the government’s long-term ability to borrow – climbed by some 12 basis points at market open, after investors priced in the added uncertainty and damaging consequences of the extraordinary last-minute U-turn.

And in a further sign of market unease, the pound, which generally moves inversely to government bonds, also sold off dramatically, hit a fresh two-year low against the euro and fell some 0.5 per cent against the dollar.

“Bond market vo