Labour infighting The briefings from No 10 may spook the bond markets

There is one narrow, perilous route by which Rachel Reeves can successfully deliver her 26 November budget, and it runs right through government bond markets.

- Heather Stewart Economics editor

But the current Labour infighting - driven by a flurry of pugilistic briefings from inside No 10 - risks cutting that route off with two weeks still to go before budget day.

Before news broke of an abortive leadership challenge, the chancellor had been carefully laying the groundwork for a tough statement, likely to include busting Labour’s manifesto promises by raising income tax.

One rationale for that drastic step is the Treasury’s belief that if Reeves acts decisively to build up more “headroom” against her fiscal rules, investors will be reassured about her determination to fix the public finances.

The chancellor’s hope is that will help to eliminate what has become known as the “moron risk premium” for the UK government’s bonds, known as gilts - making it cheaper for the Treasury to borrow.

The term was coined by Dario Perkins, of research firm TS Lombard, in the brief but chaotic Liz Truss period three years ago.