Tomorrow's Business Today
Chancellor on the brink...
What is the PR plan that rescues the government from its mire?
It is hard to see what would work – PR has limits.
How about this for a possible/likely outcome: Chancellor Kwasi Kwarteng falls on his sword, admits he got it all wrong, and goes.
PM Liz Truss ditches his (and her) budget, and tries to start again.
The present situation – neither of them speaking while chaos rips through markets – is plainly not sustainable.
The Treasury statement today about the Bank of England’s sudden bond market intervention referenced “global financial instability”.
On Sky the well-balanced Ed Conway was immediately sceptical about the “global” bit.
By 1pm he had charts demonstrating that it is not so.
“It is pretty obvious,” he said, “that this is a UK specific issue”.
It took him less than two hours to demolish the Treasury line.
The poor, in many ways, Bank of England has had to do the opposite of what it wanted. It was supposed to be selling bonds, but the panic in the market is such that instead it has to buy them. Billions of them.
Lib Dem MP Sarah Olney tweeted:
“On day 1, Kwarteng fired his most senior and experienced Civil Servant, citing a break from Treasury orthodoxy. After three weeks he has crashed the pound, triggered a statement from the IMF and now an unprecedented intervention from the BoE. He is utterly out of his depth.”
That seems hard to argue with.
The papers tomorrow are going to be brutal. Expect strong calls for Kwarteng to go, sooner rather than later.
Press release of the day
There have been 300 rate rises globally since February 2021 says this from Hargreaves Lansdown, as it delves into the bond market chaos.
Further rate rises are of course being priced in, but in the longer run bond fund managers actually expect rates to fall from here.
HL says Jupiter Strategic Bond and Invesco Tactical Bond are the two to buy.
Stories that will keep rolling
1) What is the latest market chaos? Which bits of the market are functioning normally?
2) How many billions might the Bank end up spending on long-term government debt?
3) Has Kwarteng got to go?
4) What does Simon Wolfson of Next make of the Bank’s bond intervention?