The chancellor’s announcement that overall bond issuance this year would fall, in spite of a sharp increase in long-dated gilts, caused prices to rise, but other UK assets reacted benignly to this year’s Budget speech.

His comments caused an initial fall in prices and a rise in yields on long-dated gilts. Prices subsequently rose as the markets absorbed the implications of lower overall supply.

In the Budget speech, Gordon Brown said that he would direct the UK Debt Management Office to increase the share of gilts issued with maturities of greater than 15 years.

He said net borrowing for the current fiscal year would be £37bn, falling in subsequent years to £36bn, and then to £30bn, £25bn, £24bn and £23bn. More detailed numbers showed overall issuance of gilts in 2006-07 would be £63bn.

Sterling was little moved after the Budget speech as Mr Brown maintained this year’s growth estimate for the economy. Growth forecasts this year of between 2 and 2.5 per cent remained unchanged from the estimate given in the December pre-Budget report.

Shortly after the speech, the pound stood at $1.7483 against the dollar, down slightly from the session high of $1.7508.

Against the euro, sterling also moved a little lower following the speech, to £0.6918.

The London equity market was buoyed by a surge in the property sector after a perceived softening of the rules relating to proposed real estate investment trusts (REITs).

The Treasury eased the rules governing the minimum level of interest cover from 2.5 times to 1.25 times on a pre-capital allowance basis. The previous figure was for up to 95 per cent. British Land soared 11.9 per cent to £13.00 and Land Securities rose 12.9 per cent to £20.80. See more on Reits rules relaxation

The FTSE 100 ended 0.3 per cent higher at 6,007.5 with the FTSE 250 0.5 per cent ahead at 9,858.6.

In the wake of the chancellor’s decision to add 9p on a packet of cigarettes, 4p on a bottle of wine and 1p on a pint of beer, Imperial Tobacco fell 0.9 per cent to £17.56, while British American Tobacco fell 0.1 per cent to £14.38. SABMiller, the brewer, fell 1.8 per cent £11.10 and Diageo fell 0.8 per cent to 913¾p.

More capital was to be invested in building new homes, Mr Brown said. Building materials company Hanson gained 0.8 per cent to 771.155p. Bovis Homes gained 2.5 per cent to 939p.

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