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What do Rachel Reeves, Liz Truss and Donald Trump have in common? They’ve all felt the powerful bite of the bond market when it kicked back against their economic policy.

Duncan Weldon is an economist and author who’s been watching for years as politicians lean on the bond markets to finance their budgets. For most of the 2010s, these markets seemed docile and tame, happy to keep lending governments money at low rates. But since the Covid pandemic, the spell has lifted and reality has returned to financial markets, as lenders demand higher interest rates.

This documentary explores how these bond markets that we’ve come to rely on actually work, why they bridle at certain demands, and the economic weather that shapes their stance, including the crucial art of writing a budget that won’t unnerve investors.

We look back at the infamous Liz Truss mini-budget of 2022, analysing how it shook the bond markets and unwittingly triggered a trip wire that nearly took down the UK pensions system, before turning to Rachel Reeves’ struggles with the bond market that forced her to rewrite part of her first budget.

With no sign on the horizon that politicians can do without the bond market, we need to understand how this sometimes impenetrable and opaque entity actually works, its incentives, its fears and its structure. And given that the state of the bond market can force a government to rewrite its financial plans or even bring that government down altogether, many politicians would be well advised to listen.

Guests:

Mohamed El-Erian: former CEO of PIMCO, one of the world’s largest bond investors
Rupert Harrison: former Chief of Staff to Chancellor George Osborne
Katie Martin: Markets columnist at the Financial Times
Toby Nangle: former bond investor, now financial commentator and analyst
Gemma Tetlow: Chief Economist at the Institute for Government
Julian Jessop: independent economist and fellow of the Institute of Economic Affairs

Presenter: Duncan Weldon
Producer: Nathan Gower
Editor: Richard Vadon
Programme Coordinator: Katie Morrison
Sound Engineer: Gareth Jones