Cost of insuring UK debt against default drops as Sunak becomes PM

LONDON (Reuters) – The cost of insuring Britain’s debt against default fell to its lowest since last month’s “mini budget”, according to data from S&P Global Market Intelligence on Monday, after Rishi Sunak won the race to become Britain’s next prime minister.

Five-year sovereign credit default swaps (CDS) on UK government debt fell to 30 basis points, from 35 bps at Friday’s close. This was their lowest since Sept. 23, when outgoing Prime Minister Liz Truss and her then-finance minister Kwasi Kwarteng unveiled a fiscal plan that contained billions of pounds in unfunded tax cuts.

Sunak, who served as finance minster under Boris Johnson, said on Monday Britain faced serious economic challenges and needed stability and unity.

Debt insurance costs on some of the UK’s largest lenders also tumbled.

Five-year CDS for HSBC fell to a one-week low of 130 bps from 131 bps on Friday, while those for Barclays fell to 140 bps from 147 bps and those for Natwest group narrowed to 127 bps from 134 on Friday.

(Reporting by Amanda Cooper; Editing by Karin Strohecker)