The harshest verdict on the policies of the new Liz Truss come from the financial market itself.
But among the harshest comments comes from Paul Donovan, the chief economist of UBS Global Wealth Management.
“Advanced economy bond yields are not supposed to soar the way UK gilt yields rose,” he told clients. “This also reminds investors that modern politics produces parties that are more extreme than either the voter or the investor consensus. Investors seem inclined to regard the UK Conservative Party as a doomsday cult.”
Donovan’s verdict is that the tax-cut plan offered by new Chancellor Kwasi Kwarteng could generate a short-term sugar high but wouldn’t generate a meaningful medium-term boost. And he said a rational response to the tax cuts would be simply to save them, in anticipation a future government would reverse the cuts.
Donovan is no stranger to controversy, having been suspended by the Swiss bank after comments he made over swine flu that caused offense in China. He subsequently apologized for those comments.
Far from humbled by the financial market reaction, Kwarteng told the BBC on Sunday that he wanted even more tax cuts than the £45 billion announced on Friday.
The yield on the 2-year gilt
rose as much as 66 basis points, on top of Friday’s 41 basis point increase, on expectations the Bank of England will respond to the tax cuts with steeper interest-rate hikes.
was incredibly volatile, trading as low as $1.0349 in Asian hours, all the way up to $1.0916. Sky News reported, without attribution, the Bank of England was “expected” to make a statement, though as of Monday afternoon in the U.K., no comment had been made.