Welcome to the fourth edition of THE TREASURY HUB Banking and Treasury Markets Bulletin of 2022. This Bulletin represents a review of the first quarter of 2022 and in Section 5, we have a look at the implications of rising interest rates.
The invasion of Ukraine by Russia continues to dominate financial markets along with inflationary pressures. The latter were already building before the invasion but have moved higher due to increasing energy prices in particular. While Oil prices remain high, Brent Crude has eased back to $108/barrel. There has however, been large volatility experienced in other commodity markets e.g. gas and nickel.
Consumer confidence also seems to be taking a hit while faster and larger interest rate hikes are now increasingly mentioned due to the highest levels of inflation in decades. All of this is against a backdrop of a possible slowdown in economic activity, which can have a “double negative” impact on businesses: higher costs and lower sales/profits. In this scenario, financial covenant compliance in any loan agreements suddenly take on significance – see Section 5 for further analysis. From a risk management perspective, it looks like the most volatile period in markets, financial and otherwise, since 2008 and, in some cases, since the 1970s.
Please get in touch with our Corporate Finance team if we can be of any assistance.
The Treasury Hub - Banking and Treasury Report April 22 can be downloaded here.
For any queries relating to this newsletter, please contact Chris Ball, Partner.