So, did the markets react to Osborne’s first budget ?

A long hard stare - and a long hard look

Before the Chancellor stood up the 10-year UK Bond was priced at 3.44% and at the time of writing (5pm on Tuesday) it was almost unchanged at 3.45%. These UK bonds (sometimes referred to as “Gilts”) are interest payments that the UK government makes to anyone that lends them money. It’s not much more than a grown-up version of National Savings – You lend money to the government and they pay you back later (in the case of the 10-year bond, they pay you back 10 years later… simples), but they also pay interest, and that interest rate changes and that’s the thing that people get excited about.

You might wonder why there is such a concern about a piddling little interest rate on such a big occasional as budget day (you might think that there are more important things to worry about, such as the tax on Champagne) – The answer is that part of the reason these interest rates change is that the market worries that the UK might go bust, and if it does, then the market demands more money as compensation for taking the risk. The current price of Greek 10-year bonds is 9.77%, Germany is 2.68% and Swiss 10-year bonds are 1.59%.

The Sterling / Dollar exchange rate got a bit better, but only by 0.89 US cents, and over the past 10 non-budget days there have been 4 days when its moved by more than that amount.

The FTSE 100 dropped by 0.98%, but that doesn’t really count either, because a lot of the profit that those top 100 “British” companies make comes from overseas anyway.

So, that’s it – The markets didn’t really react at all today, but maybe that’s because the carnage we got was promised some weeks ago. And that suggests that if Osborne hadn’t swung the axe so hard, then there might have been a very negative response.

One last thought, often the detail of budgets takes some time to digest – but that’s OK, because the markets will be open for business tomorrow.