Moody's, which provides research data and analytic tools for assessing credit risk, reaffirmed its top rating for government debt on September 9, and unlike rival Standard & Poor's kept a stable outlook -- something which lead UK analyst Arnaud Mares said had been justified by the growing political consensus for fiscal consolidation.
Britons better understand the need to reduce heavy public borrowing than the public in neighbouring countries with similarly stretched finances such as France, said Mares, who is also Moody's lead analyst for French government debt.
"The outlook is as secure as it was previously, but the assumptions we have made over the past months have to some extent been vindicated by the messages that have been conveyed by senior politicians," Mares told Reuters.
Gilt futures rallied to a session high after the interview was published, dragging Bunds into positive territory, with both assets also buoyed by earlier comments in support of quantitative easing from Prime Minister Gordon Brown.
Sterling strengthened against the dollar, rising by around 20 ticks to $1.5792.
How to tackle the swelling budget deficit -- which the finance ministry forecasts will hit 12 percent of gross domestic product this year, requiring 220 billion pounds of gilt issuance -- is now a major theme in the run-up to a national election due by June.
The Conservatives, who opinion polls predict will defeat the Labour Party, last week proposed freezing public sector salaries, raising the retirement age and cutting some benefits to reduce government spending.
Brown also accepts the need to reduce the deficit, though he is concerned that solid growth returns before sharply tightening fiscal policy.
Mares declined to comment on which party offered the better proposals for reducing the budget deficit, saying all parties now understood the need for tighter fiscal policy.
"The main message that we take from the conferences is that there seems to be a consensus among all major political parties about the need to curb expenditure significantly in coming years," he said.
"There have been several precedents in the UK of a strong reduction in public expenditure as a share of GDP, so if there is public consensus, it can be done.
"Not just in (British) political circles but among the public there's a very strong awareness of the challenges to the public finances," Mares said.
"This is a very strong theme, more so than other countries that face challenges. There doesn't seem to be today in France as strong a debate or awareness of the challenges that the public finances face."
One factor that has supported demand for government debt at a time of record issuance has been the Bank of England's quantitative easing policy (QE), which has involved buying over 160 billion pounds of gilts since March -- more than the sum issued.
However, this aid will not last forever, with most economists doubting the Bank will extend its QE policy once the 175 billion pounds already allocated is spent come November.
The head of the DMO, Robert Stheeman, expressed concern in an interview last week that uncertainty about the future of QE could make it hard to sell gilts.
Nonetheless Mares, like Stheeman, expected demand to remain solid overall.
"Financing may not be quite as easy in coming months as it has been, but I have no concerns that the DMO will be able to raise funds," he said.
A spokesman for Standard & Poor's confirmed the ratings agency maintained its triple-A rating and negative outlook for British government debt after the party conference season.
He pointed to S&P's last report on the UK on June 4, which implied a review of this outlook was unlikely until after the next election. S&P cut its outlook for gilts on May 21.
