Leading Indicators | Spring signals; green shoots emerging?

Spring green shoots potentially emerging for UK economy

Chancellor Rachel Reeves delivers the Spring Statement today with an estimated £22bn of headroom against her fiscal rule, largely driven by stronger‑than‑expected tax receipts since the Autumn Budget. For markets, the importance lies less in the headline figure and more in what it signals - borrowing is running below expectations, shaping expectations for lower near‑term gilt supply and lending greater credibility to the government’s medium‑term fiscal rule.

Lower gilt issuance should temper bond market fears, continuing the post-budget trend

That improved fiscal backdrop is shaping expectations for gilt supply. The FT reports that major investment banks now forecast around £247bn of gilt sales in the fiscal year to March 2027, based on the average of 7 estimates. That compares with roughly £304bn this year, nearly a -20% drop. If delivered, it would be the first annual fall in 4 years and the lowest level in 3. After an extended period of heavy gilt supply, a lower issuance should relieve some pressure on the market and help contain borrowing costs, providing a more supportive rates backdrop for UK CRE.

Financing conditions turn most supportive since late 2024

Meanwhile, UK gilts have continued to rally since the Autumn Budget. Ten‑year yields, which briefly rose above 4.9% last year, a 16‑year high, have fallen back to just above 4.3%. The move has been mirrored in swaps, with the 5-year rate around 3.52%, its lowest level since September 2024, and down c. -30bps since last month. For leveraged CRE buyers, this marks the most favourable financing environment since late 2024, albeit one that remains sensitive to geopolitical and global macro shifts.