Why it’s unfair to compare the current market movement with a disastrous mini-budget.

Borrowing rates rose after Rachel Reeves’ budget hit a one-year high in the bond market, prompting tense comparisons with the mini-budget passed in September two years ago that ended the political career of former prime minister Liz Truss.

But today’s step is insignificant in comparison. Moreover, news has emerged that may explain some of the bond market’s concerns.

The UK 10-year yield is now 4.48%, up from around 4.24% just before Ms Reeves presented her Budget, down just under a quarter of a percentage point.

Holders of UK government debt have sold off some of it, causing bond prices to fall, meaning the amount of interest they earn is rising.

The shift was less dramatic than the one that followed the failure of Ms Truss’s mini-budget, said Hal Cook, senior investment analyst at stockbroker Hargreaves Lansdown.

“In what was a huge move, the 10-year gold bond yield rose from around 3.3% a couple of days before the mini-budget to around 4.5% a couple of days after.”

Recently, bond yields have been rising since mid-September, he said. “There are several reasons for this, and the upcoming budget is one of them. “Uncertainty around this particular budget has made bond investors nervous, and expectations of higher future borrowing in particular have impacted sentiment on the attractiveness of UK government debt.”

On top of that, it emerged today that the Office for Budget Responsibility, the government’s spending watchdog, misjudged how much wiggle room Ms Reeves would have when she moved to a new national debt target.

Ruth Gregory, Deputy Chief UK Economist, Capital Economics

The March estimate of 62 billion pounds was “an error,” said a footnote first spotted by Bloomberg, and the true figure was 18 billion pounds lower, leading markets to wonder whether it had made finances too difficult for Ms. Reeves.

Apart from the OBR’s error and the modest nature of the rise in debt costs, there are many other differences between this week’s budget and Ms Truss’s.

The market went wild because Ms Truss planned to use debt to pay for tax cuts and hoped it would lead to a surge in growth – the details of her plan were not spelled out. She also said her plan could be implemented without any cuts in government spending, something few economists agreed with.

The International Monetary Fund openly criticized Ms Truss’s plans but welcomed Ms Reeves’ budget. Both moves were noted as unusual for the UN agency.

In the days since Ms Truss’s budget was passed, pressure has mounted on her to resign. She hoped that her chancellor Kwasi Kwarteng’s fall on the sword would save her, but she eventually left after a month under pressure from her MPs.

A week before his resignation Daily Star The newspaper asked if she could survive the salad. She couldn’t.

Polls taken at the time showed the Labor Party ahead by as much as 36 points, leaving its Conservative Party with just 22 seats in Parliament.

It also collapsed the pound: at one point, the pound sterling approached the value of just one dollar.

Rapidly rising borrowing rates have upended the mortgage market, upending thousands of people’s home-buying plans and raising borrowing costs by billions of dollars.

The turmoil also reduced pension estimates by £425 billion in 2022, according to a report from the pensions regulator this year. Some pension funds with significant investments in government debt have also bet on low yields. They were forced to sell this debt, causing yields to rise further. They eventually recovered thanks to help from the Bank of England.

Ruth Gregory, deputy chief UK economist at Capital Economics, said: “The market implications of Wednesday’s Budget are a far cry from the 2022 mini-Budget episode. While we can’t completely rule out the possibility of a rapid rise in gold yields triggering a self-reinforcing cycle of further price declines, we don’t think this is the start of another “Liz Truss” scenario.

It is also widely accepted that Ms Reeves’ actions were driven to some extent by the disarray she inherited from the previous government. The Office for Budget Responsibility said the previous government spent an extra £9.5 billion at the start of the year that was “not reported to the OBR”.

However, the higher cost of debt would be unwelcome news for Ms. Reeves. With UK debt at £2.69 trillion, a quarter of a percentage point rise in borrowing costs implies an additional £6.7 billion a year in interest costs. In practice, the cost of the debt is fixed when the bonds are sold, but if the higher yield is maintained, it will cost the taxpayer more when more debt is issued.

Ms Reeves also played down the impact, saying “markets will move any day now” and sought to reassure her of her commitment to “economic and financial stability”.

Paul Johnson, director of the Institute for Fiscal Studies (IFS), warned that the budget’s “incredibly low spending increases” meant taxes would likely have to rise again if Ms Reeves’ growth plan backfires.

But the Chancellor told Channel 4 she would “absolutely not” go back and raise taxes again.