James Carville, an adviser to President Bill Clinton, once famously said that if he were to be reincarnated, he would like to come back as the US treasury’s long bond, because that was where the real power lay. For the last 12 years, since the end of the banking crisis, a born-again Carville would have been frustrated in the role. It seemed that governments could borrow as much as they liked, paying tiny, and in some cases even negative, rates of interest.
Not any more. In the UK, the equivalent of the long bond had the power to destroy the Truss government, and next week we will learn how much the bond markets are going to extract, in the form of higher taxes and public spending cuts, to pony up the billions the Sunak government needs to pay the bills. The omens are, at best, mixed. The prices of gilts, the UK government debt, have recovered from the post-Kwarteng panic, but they are miles away from the levels before his Budget.