The Budget is done. Interest rate risk isn’t.

Chancellor John Healey’s first Budget yesterday was exactly what bond markets wanted: uneventful. Gilts barely moved during the speech, and 2- and 5-year SONIA swap rates have eased slightly this morning.

But a quiet Budget doesn’t mean lower risk for borrowers:

• The OBR expects inflation to peak at 3.8% in early 2027
• Markets expect the Bank of England to raise Bank Rate next week
• Fiscal headroom has shrunk to £14.5bn, with the big decisions pushed into 2027
• Even after this morning’s dip, the 5-year swap rate is around 4.77%, a full percentage point above Bank Rate

This morning’s move is small, and it may owe as much to global markets as to the Budget. That’s the point: rates move every day, and the borrowers who benefit are the ones who are ready to act.

At Vedanta Hedging, we’ve been helping UK businesses manage interest rate risk since 2011. We can help you:

• understand what rising rates would mean for your cash flow
• compare swaps, caps and collars
• set target rates and monitor the market on your behalf
• make sure you get a fair price from your bank

If you have floating-rate debt or a hedge expiring in the next two years, now is a good time to talk. Get in touch with our team.

#UKBudget #InterestRates #Hedging #SONIA #BankOfEngland #TreasuryManagement

Parag Kothati

Parag Kothati