The UK government bond yield curve has steepened, as the market reassesses the outlook for fiscal policy.

Chris Scicluna, head of the London-based Daiwa Capital Markets' European research department, said that it is evident that the market is reassessing the outlook for UK fiscal policy, leading to a significant steepening of the UK government bond yield curve. The vote in the House of Commons gives reason for people to reconsider the possible future of public borrowing. The market has long been aware that the government has strayed from its borrowing trajectory and anticipated corrective measures in the budget, but if the market continues to move in today's direction, the government may have to announce some news on the revenue side rather than cutting public expenditure. The Bank of England is evidently evaluating Quantitative Tightening and may end asset sales in the fall.