Bonds: Budget well-received, but OBR forecasts dubbed over-optimistic

These were the movements in some of the most widely followed 10-year sovereign bond yields:

US: 2.56% (+4bp)

UK: 1.22% (+3bp)
Germany: 0.37% (+5bp)
France: 1.02% (+6bp)
Spain: 1.81% (+7bp)
Italy: 2.25% (+6bp)
Portugal: 3.99% (+1bp)
Greece: 7.19% (-1bp)
Japan: 0.08% (+0bp)

Longer-term Gilts were one of the best performing issues in the developed world even as the Chancellor outlined an expansionary fiscal stance for the 2017/18 financial year in his Spring Budget.

Nevertheless, while all eyes in Britain were on Philip Hammond, the main driver of the session was unexpectedly strong reading on the US jobs market from consultancy ADP.

The US private sector added 298,000 jobs in February, far outpacing the 190,000 rise which economists had forecast, just two days before the release of the official labour market data for that same month.

That led Ian Shepherdson, chief US economist at Pantheon Macroeconomics, to bump up his forecast for Friday's US non-farm payrolls report from 200,000 to 250,000.

Regarding the Budget, Hammond opted to lock-in the fiscal savings obtained in 2016/17 thanks to the UK economy's resilience and efforts to cut spending and raise revenues, which meant the public deficit would be roughly roughly 0.9 percentage points lower from 2016/17 onwards, OBR estimated.

The decision to treat the overshoot as a one-time windfall "made sense", Fabrice Montagne and Andrzej Szczepaniak from Barclays Research said, it also meant the fiscal stance would be expansionary as the economy slowed in 2017/18.

However, the OBR's medium-term forecasts - which were lowered - were met by scepticism at Barclays.

"We are sceptical regarding the capacity of the British economy to accelerate from 1.6% in 2018, to 1.7% in 2019 and above 2.0 thereafter. We believe a more cautious forecast would have made more sense given the slowdown in trend growth from above 2% levels to about 1.5% as well as Brexit related challenges (in particular exit from the EU, the European single market and the EU customs union in 2019)."

OBR also assumed that starting from 2019 the annual contribution to the EU Budget would be spent inside the UK - boosting GDP.

Other possibilities would be to save those funds in order to reduce the shortfall in the public sector accounts more rapidly or to allow for less structural consolidation, Barclays said.