Markets remained under pressure throughout the third quarter of 2008, with the financial sector experiencing virtually unprecedented events on a global scale. The UK government's nationalisation of Bradford & Bingley was eclipsed by significantly larger nationalisations in the US together with other government intervention and guarantees across the eurozone.Financial institutions continued to hoard cash and effectively refused to lend to each other. These stresses were evident in the London Inter-bank Offered Rates (LIBOR), the most widely used of which is the three-month term. This was at an elevated 5.8% for most of the quarter and increased to 6.3% at the quarter end as the three-month maturity approached the end of the year.Aside from the troubles within the markets, the outlook for the UK economy was also looking bleak at the quarter end, with Consumer Price Index inflation accelerating to 4.7%. House prices were down 12.4% on the year, gross domestic product stagnated in the second quarter and surveys suggested the UK economy had either entered or was about to enter recession.The New Star Money Market Unit Trust invests solely in fixed-rate cash deposits with highly-rated banking institutions. At the quarter end, its weighted average maturity was approximately three months, a safety-first approach that appeared appropriate given the conditions. Its quarterly performance placed it in the second quartile relative to its peers.
145.97p
