FTSE 100 Edges Higher After Budget as Gilt Yields Ease and Banks Rally

London’s blue-chip index edged higher on Thursday 29 October 2026 in the first full trading session after Chancellor John Healey delivered his first Budget, as calm bond markets and a smaller-than-feared tax rise on banks steadied investor nerves. The FTSE 100 opened up 0.25 per cent, or 27 points, at 10,721, after closing broadly level on Wednesday evening, while the FTSE 250 opened up six points, or 0.27 per cent.

The reaction mattered because the Budget had been trailed as a high-stakes test of market confidence in the new government of Prime Minister Andy Burnham. Healey, who presented the Budget on Wednesday 28 October 2026, told MPs he had a commitment to fiscal discipline and said his plans would give families breathing space, and the Office for Budget Responsibility put fiscal headroom at £15 billion, down from £23.6 billion in March. For context on related Budget measures, see the UK Budget 2026 energy payment.

FTSE 100 — Quick Reference Summary

Why gilt markets stayed calm after the Budget

Government bond markets, often the first to punish a Budget they dislike, reacted calmly. The 10-year gilt yield eased to around 5.32 per cent on Wednesday, down about two basis points on the day, while the 30-year yield fell about three basis points to 5.71 per cent, as bond prices rose. On Thursday morning the 10-year yield was around 5.30 per cent, down roughly three basis points. Analysts linked the calm to Healey’s emphasis on lower borrowing supporting long-dated gilts. Kathleen Brooks, research director at XTB, described the Budget as steady as you go, saying the bond market was calling it a very boring budget, with yields a couple of basis points lower at the long end and virtually unchanged elsewhere. Tom Stevenson, investment director at Fidelity International, said the Budget gave investors the message of stability.

Banks rallied on a smaller-than-feared surcharge rise

Britain’s biggest lenders were among the clearest winners. The Budget raised the surcharge banks pay on profits above a set threshold from 3 per cent to 6 per cent for 15 months from January, partially reversing a cut from 8 per cent three years earlier under then-prime minister Rishi Sunak. Because many investors had feared a larger increase, shares in Lloyds, Barclays and NatWest rose between 3.3 per cent and 3.6 per cent on Wednesday. Thursday’s session brought a more mixed picture for individual banks, with Lloyds falling back after its third-quarter results even as the wider index held its gains. Lloyds reported a rise in third-quarter pre-tax profit to £2.3 billion from £1.2 billion a year earlier, broadly in line with expectations of £2.28 billion, with net interest income 10 per cent higher at £3.8 billion.

Housebuilders and bookmakers moved in opposite directions

Not every sector shared the calm. Housebuilders fell after details of the government’s Your First Home scheme disappointed investors, with a lack of detail on timings, funding and duration suggesting the programme could be smaller than hoped. The scheme’s £4.7 billion of government-backed lending was only about a fifth of what Help to Buy delivered. Bookmakers moved the other way. The rise in machine games duty from 20 per cent to 25 per cent was less than many investors had feared, and shares rallied sharply, with Entain up 5.6 per cent and Rank up 11.7 per cent on Wednesday. Rank Group later warned, however, that the duty rise would add around £9 million in costs per year before mitigating actions.

What the market reaction means for households and investors

For households, the market reaction is a background signal rather than a direct change to bills or savings. Calm gilt markets help keep government borrowing costs contained, which in turn supports mortgage pricing over time, though no single day’s trading sets mortgage rates. For investors, the session confirmed that the Budget’s most market-sensitive measures, the bank surcharge and gambling duties, landed more softly than feared. The outlook is not settled. The Office for Budget Responsibility cut its 2027 growth forecast to 1 per cent from 1.6 per cent in March, while raising its 2026 forecast to 1.2 per cent, and it estimated a £19 billion rise in the welfare bill in the current financial year. Markets will next watch the European Central Bank’s decision, due on Thursday, and US economic data for clues on interest rates, including the Federal Reserve holding interest rates.

Frequently Asked Questions

Why did the FTSE 100 rise after the Budget?

The index edged higher because bond markets stayed calm and the tax rises on banks and gambling firms were smaller than many investors had feared, removing a source of uncertainty that had weighed on shares before the Budget.

What happened to gilt yields after the Budget?

The 10-year gilt yield eased to around 5.32 per cent on Wednesday and about 5.30 per cent on Thursday morning, a small fall that signalled investors were not demanding higher returns to hold UK government debt.

Which shares rose most after the Budget?

Banks such as Lloyds, Barclays and NatWest rose between 3.3 per cent and 3.6 per cent on Wednesday, while bookmakers Entain and Rank rallied 5.6 per cent and 11.7 per cent respectively after the gambling duty rise came in below feared levels.

Did every sector benefit from the Budget?

No. Housebuilders fell after the Your First Home scheme disappointed investors on detail, and some individual stocks, including Lloyds on Thursday after its results and Haleon after cutting guidance, fell even as the wider index rose.

What should investors watch next?

The European Central Bank’s rate decision on Thursday, US growth and inflation data, and the government’s spending review next year, when details of how the 3 per cent of GDP defence target for 2030 will be funded are due to be set out.