Investors gave a thumbs down to the UK economy today, never mind the billions of pounds of budget cuts and even positive note form a credit rating agency. They are not buying the apparent success story, and so they went to the market and dumped British government bonds.
Gilts futures eased 19 ticks to 122.30, pushed down by more gloomy economic data.
The Bank of England said earlier today business lending contracted for the fifth month running in July, making small firms struggle even more to access credit and funding.
"Contacts of the Bank's network of agents noted that while credit conditions were easing for larger businesses, they remained tight for smaller firms," the report said.
Investors fear tight credit markets won't allow companies to hire more staff and carry out investments, slowing economic growth.
Not even Moody's reassurance about Britain's top credit rating was enough to fuel gilt prices.
"Despite a weak post-crisis balance sheet and challenging economic outlook, the UK is able to meet these challenges whilst maintaining its Aaa credit rating," the credit agency said. "The UK rating therefore retains a stable outlook."
The anxiety to keep the top credit rating, which pushed the new government into billions of pounds worth of budget cuts, wasn't the key to keep the economy going, after all...
