Written by Susannah Streeter senior investment and markets analyst, Hargreaves Lansdown
Amid the wait for the wheels to screech on another u-turn, the door to no. 11 Downing Street is already groaning on its hinges, with Kwasi Kwarteng exiting the Treasury.
The finger of government blame was pointing straight at the Chancellor as soon as he was ordered to dash back to from the US a day early, going straight from arrivals to a humiliating departure.
His promise of a medium-term fiscal plan to be delivered on Halloween did not provide enough reassurance that the government was in control of economic policy and investors showed signs of taking fright again. But Liz Truss is still facing a rocky horror show of her own making, given that the UK is still hurtling back into a 1970s time warp. Even if this embarrassing reshuffle is accompanied with a fresh reversal of policy, as far as the credibility of the government is concerned, significant damage has been done. There will be a long way to go and significant bridge building ahead before the UK risk premium disappears.
The cost of government borrowing fell further earlier, with gilt yields dropping as speculation swirled that there would be a change at the Treasury, an indication that investors in the UK might welcome this change to the front seat line up.
But since his departure was made clear, 10-year gilt yields have edged up slightly and the pound fell below $1.12, with no fresh euphoria in sight as markets digest another bout of political upheaval. For now the Prime Minister has won breathing space, but the financial markets are highly sensitive and anything less than a co-operative approach with the Bank of England, the Office of Budget Responsibility and international institutions could cause fresh instability.