U.K. Markets Waver as Liz Truss Steps Aside

The British pound inched higher, while government bond prices were mixed on Thursday as Prime Minister Liz Truss announced her resignation after a tumultuous six weeks in the job.

The pound traded less than half a percentage point higher against the dollar, after reaching $1.13 as Ms. Truss read a short statement outside Downing Street. Ms. Truss said there would be a Conservative Party leadership election that would be completed in the next week and that she would remain prime minister until her successor was chosen.

Bond yields, which move inversely to prices, fell on the news but quickly reversed. The 10-year yield, a measure of government borrowing costs, fell to about 3.76 percent but then climbed back, closing at 3.91 percent. Short-dated bond yields also ended the day higher, but the yield on 30-year bonds were a little lower, at 3.96 percent.

The moves in the market were muted as the change threw Britain’s economic future into even more uncertainty.

While the resignation brings a firm end to Ms. Truss’s tax-cutting economic agenda that had produced turmoil in financial markets, it introduces more political instability at a time when households and businesses are grappling with a fierce cost-of-living crisis. On Wednesday, data showed that the annual rate of inflation had topped 10 percent and food prices were rising at their fastest pace in four decades.

A new prime minister is set to be in place before a fiscal statement scheduled for Oct. 31. Jeremy Hunt, who was made finance minister less than a week ago, planned to use that statement to announce “difficult” spending cuts as he seeks to plug a hole in the nation’s finances in order to lower debt levels, part of his efforts to restore the government’s fiscal credibility. As it’s unclear who the fractious Conservative Party will choose as its next leader, those tax and spending plans are more unpredictable.

Sumber: www.nytimes.com