UK Markets Aren’t Afraid of a Labour Government

In the April 1992 UK election, a consistent Labour lead in polls was unexpectedly overturned in the vote, with the Conservatives winning a fourth consecutive victory. In the following hours, at 2:30 a.m. and again at 8:15 a.m., the Bank of England took advantage of a surging gilt market to sell £1.6 billion ($2 billion) of new bonds; throughout the night “much more than this amount was sold from the bank’s own holdings.”

The central bank wasn’t making a political statement. In the month prior to the plebiscite, two-year gilt yields had soared by a full percentage point to 10.6% as investors took fright at the prospect of a free-spending Labour administration; the authorities used the rally that erased the surge in borrowing costs “to secure funding in large quantity.” Fast forward by 32 years, and there’s no such market consternation at the possibility of Labour’s return to government.