Budget 2011: Gilts climb and pound falls on UK growth cut

The price of UK 10-year government bonds stayed higher after the country’s growth forecast for the year was slashed from 2.1% to 1.7% in George Osborne’s Budget.

The yield on 10-year government bonds was five basis points lower at 3.55% at 12:44, while the two-year note also saw its yield drop three basis points to 1.26%.

Gilts had already risen this morning before the Budget announcement, with the yield on 10-year notes falling two basis points to 3.58% as it was revealed only three members of the MPC voted for interest rate rises.

Meanwhile, the pound declined further as the forecast for UK growth disappointed against the US dollar, dropping 0.8% to $1.6231 as of 12:48, and 0.4% versus the euro to 87.06.

Sterling had already fallen this morning, down 0.5% against the dollar to $1.6295, following the release of the MPC minutes.

Equity markets remained unmoved by the Chancellor's speech with the FTSE 100 hovering at the same level as before the Budget, at 5,762.86, down 0.01%, compared to 5,764.35 at 12:25.