UK-based corporates will have spent much of the past month digesting the implications of the late-September mini-budget that shattered already fragile market confidence in the pound.
From a funding perspective, the uncosted package of measures announced by the UK government was just the latest in a line of policy decisions that have contributed to average yields in sterling corporate bond markets running more than three times higher than they were at the end of last year – a level last seen in the aftermath of the global financial crisis.
Digital asset manager Collidr observes that the value of UK corporate bonds declined by more than 13% in the first half of this year, increasing the premium UK businesses are paying for fundraising compared with corporates in the UK and the eurozone.
The lack of clarity and even being able to forecast short-term FX impact is a major factor for businesses
Of more immediate importance is the volatility of sterling, which plumbed new depths against the dollar after the announcement of massive unfunded tax cuts, and rebounded only modestly when the proposed removal of the higher 45p tax rate and the reduction in corporation tax were dropped.
JPMorgan’s
