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The extraordinary events in U.K. financial markets on Wednesday saw the Bank of England surprise markets with a half percentage point interest rate cut — and the yields on U.K. bonds rise.
The long end of the gilt yield curve, which in the U.K. stretches out to 50 years TMBMKGB-50Y, +31.00% , rose 5 basis points, and the yield on the U.K. 10-year gilt TMBMKGB-10Y, +23.24% also edged higher.
The Bank of England cut interest rates by a half percentage point, created a funding program to lend to small- and medium-term businesses, and reduced banks counter-cyclical capital buffer requirements.
U.K. Chancellor Rishi Sunak meanwhile announced fiscal stimulus measures he valued at £30 billion ($39 billion)
The British pound was stable against both the U.S. dollar GBPUSD, -0.4183% and the euro GBPEUR, -0.2797% after the moves.
“With both the Bank of England and the UK government delivering targeted stimulus in a coordinated fashion, GBP finds itself in a rather unique position within G10 FX space, where authorities are pulling in the same direction,” said analysts at ING. “This is why the GBP response to the unexpected 50 basis points rate cut (under a normal scenario a clear negative for the currency) was fairly muted today.”
Of various stocks that moved on the budget news, Bloomsbury Publishing BMY, -2.68% rallied 7% on the announcement from Sunak the U.K. was scrapping the value-added tax on media.
GCP Infrastructure Investments GCP, +2.72% climbed over 3% as the U.K. announced a £2.5 billion “pothole” fund for road repairs.
The FTSE 100 index UKX, -1.40% however still declined, losing 1.4% as global stock markets were rocked by the lack of agreement on a U.S. government stimulus measure.
Outside the budget news, shares of Travelex owner Finablr FIN, -25.10% were slammed by 23%.
Suspended hospital operator NMC Health NMC, +0.00% on Tuesday night identified $2.7 billion in facilities not previously disclosed or approved by its board. Finablr founder Bavaguthu Raghuram Shetty also founded NMC and has pledged shares in both companies as collateral for loans.
