News of Brown’s self-termination decision caused sterling to drop more than a cent against the dollar yeterday.

The pound dropped from $1.502 to $1.486 and it also fell against the euro. The euro increased from 85.5p against sterling to around 86.5p.

The idea of a left-leaning coalition between Labour and the Lib-Dems must horrify the City…and will put bond investors on edge.

Robert Peston of the BBC notes this morning that the 10-year benchmark gilt fell sharply at the opening, down 0.8, after a weak close last night. And suggests a tricky auction of £2.25bn of gilts could be on the cards as investors begin to question whether a strong, determined, deficit-cutting government will be formed.