Why Interest Rate Holds Are Just the Tip of the Iceberg in Financial Decision-Making

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The Bank of England, FED and ECB all decided to hold interest rate rises during the last couple of weeks. Whilst the industry has widely welcomed the pause, the focus on key interest rates is sometimes disproportionate. 

Here is why: 

We speak to several introducers, brokers, advisors and clients from all over the world. The best clients, the most sophisticated, are, of course, interested in price, but they are also only somewhat beholden to a handful of basis points here and there. What drives our transactions are:

  1. Can you deliver and can you deliver on time?
  2. Are you going to make my life easier?
  3. Are you clear and direct? 

If a project or transaction hinges on 25,50, or even 200 basis points, should you be doing it? Everyone is focused on margin more than ever, rightly so, but if the margin is marginal, a rethink is required about whether the transaction is correct.

Clients want certainty of execution above all things. If a client gets a deal which is 50bps cheaper than what we offer but then gets re-traded or, worse, doesn’t complete, is that saving worth it? Clearly, it is not.

Providing a solution to a problem has always been Tenn’s focus. In June 2021, when we outlined Tenn for the first time, we said we were launching a lender ‘who can lend internationally, traverse structures, is comfortable operating in complex situations and in tight timeframes.’ Tenn offers global, asset-backed solutions. Tenn does not compete on price. We don’t re-trade a deal once in execution. We price what we think is correct. We give certainty of completion. 

It is a dangerous game to trade on price, and actually, it is a false economy. Cheaper is very rarely better.

So, yes, broadly, it’s good news that rates are on hold, but value is rarely created at the rate level.