The UK sees a “screeching handbrake turn in the Truss economic motorcade now a new driver is at the wheel”.
In what has become a very volatile market driven wholly by what is happening in Westminster, this morning is the mirror image of last week’s price action. UK Government bonds are lit, their yields falling at the same pace as they did when the Bank of England (BoE) stepped in at the end of last month to support the markets. The spread between UK and US 10-year bonds has now reversed, when just last week it stood at over 50 bps. Sterling is rising and the febrile atmosphere of last week seems like a distant memory – calm has returned. And this is due to the screeching handbrake turn in the Truss economic motorcade now a new driver is at the wheel. This new driver in Chancellor Hunt signalled his intent to shape policy and his experience of getting out on the front foot and bringing forward his plans, and importantly more openly, is in stark comparison to the previous Chancellor Kwarteng’s almost embarrassed, muffled and tone-deaf performance. Gone is almost all of Prime Minister Truss’s economic vision and most of her leadership election promises. The income tax cut plan has been shelved indefinitely and the UK energy support scheme will apply now for just six months. Gone are virtually all of the unfunded tax cut promises from the previous Chancellor and gone soon surely will be the original architect. There is a new sheriff in town and he may well as be saying ‘in Truss, we don’t trust’ and the markets share a similar view sadly for her.
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