almost six months after a crisis of confidence shook the uk bond market nicholas lyons the lord mayor of london said he watched closely as turmoil also gripped the us and swiss banking sector in march   one key lesson reinforced by what had already been seen in the uk’s gilt market last september was “the speed with which a loss of confidence can lead to a shortterm liquidity crisis” lyons said in an interview with marketwatch on monday that was demonstrated by the abrupt end of credit suisse cs  with rival ubs group ag ubs last month agreeing to acquire the troubled lender his second takeaway was how “a run on a bank can happen in an incredibly short time” during the socialmedia age as underscored by the collapse of california’s silicon valley bank still he said it was “reassuring to see the speed with which regulators have responded” lyons 64 serves as international ambassador for the uk’s financial and professional services sector and is head of the city of london corp which oversees the square mile at the heart of london’s financial district where most trading and investment transactions are carried out  financial markets have returned to relative calm since the volatile days of march giving financial authorities the chance to assess the fallout last week for instance the international monetary fund said the global financial system showed “considerable strains as rising interest rates shake trust in some institutions” and that “there’s a greater probability of slower growth because of financial instability” for his part lyons said he doesn’t see the chance of similar banking turmoil unfolding in the uk because its banks “are extremely wellcapitalized and the quality of regulation is very strong”   the common thread tying last year’s turmoil in the uk bond market to march’s bankingsector developments is the swift rise in bond yields since early 2022 which caught many regulators and financialmarket players off guard in the us the rise in yields has been primarily due to the federal reserve’s aggressive ratehike campaign to combat high inflation following years of low interest rates the uk’s problems last fall though were sparked by a government taxcut plan that the market didn’t “like at all” in lyons’ words leading to a loss of confidence in the financial management of the british economy the bank of england ultimately intervened to contain the furious selloff in uk government debt that had led to a significant spike in gilt rates  as of tuesday the 10year gilt rate tmbmkgb10y and 10year us treasury yield tmubmusd10y were at 3751 and 3589 respectively or more than two full percentage points each above where they started in january 2022     “the question that we are all asking ourselves is whether or not there will be another of these ‘isolated’ incidents where we might not have envisioned where this significant increase in longterm interest rates will manifest itself in a financial problem for somebody” lyons said in the interview  he was in san francisco on monday as part of a weeklong trip to the us and canada where part of his mission is to drive investment interest in the uk an “absolutely uphill challenge” at a time when us asset managers are searching for opportunities domestically and not abroad said terrence o’hanlon executive director and founder of the association of asset management professionals in fort myers florida  the irelandborn lyons became the 694th lord mayor of london in november and serves a oneyear term the role of lord mayor is a largely ceremonial one year that’s distinct from that of the mayor of london and has its roots in medieval times  a veteran of the financial industry lyons began his career in the early 1980s working at what would later become jpmorgan chase  co jpm in commercial banking debtcapital and equity markets and mergers and acquisitions he also worked at lehman brothers from 19952003 five years before its demise in 2008 and is currently on sabbatical from his role as chairman of the phoenix group holdings  in the interview lyons said he sees a “substantial” contrast between the 20072008 financial crisis and the 20222023 turmoil in the uk bond market and banking industry “our banking system in the uk and i know this to be true in the us as well is very very much better capitalized” with “much higher levels of tier 1 capital and balance sheets that have been brought much better under control  “the buffers that are in place on capital mean there are much better protections” lyons said still one of the questions to arise from swiss regulators’ decision to wipe out credit suisse’s additional tier 1 bonds known as at1s “is whether or not resolution models that regulators have asked banks to formulate ie how would they do an orderly resolution if there was a solvency or liquidity problem needs to be looked at again”    despite his seemingly sanguine view on the risks of a banking or financialmarket crisis lyons said he has a somewhat different take on the economic outlook britain’s economy ground to a halt in february the most recent month for which figures are available and the bank of england hiked interest rates again in march after 12month cpi inflation remained stubbornly stuck above 10 in february  “we are in a situation where quite a lot of the western economies are either going to go into a shallow recession or may just keep their heads above water i don’t think it makes much difference one way or the other to be honest” he said lyons also said it was “interesting” to see central banks like the fed intervene to contain the banking fallout while also continuing to raise interest rates demonstrating that policy makers’ fight against inflation remains the “no 1 priority” and that the banking turmoil was “manageable”   while there are some strong reasons why inflation could fall quickly from current levels he said there are also reasons to argue that “a higher level of inflation is likely to persist for longer than most people expect and that therefore means interest rates need to stay higher” for longer   “i certainly struggle to understand the conviction of the international monetary fund that we will in a reasonably short period of time get back to a low interestrate environment i don’t see that happening for a while” lyons said “bear in mind that for a long time before the financial crisis we were quite used to interest rates being 4 to 6 in the us and uk and i don’t think that’s an unhealthy place for them to be long term”