Because of the fall that has occurred in our exchange rate, it will also show up as higher inflation than otherwise. Even if we had perfect foresight, we cannot adjust policy in a way which would avoid these outcomes altogether. The best we can hope for is a combination which minimises the longer-run disruption to our economy.
This, in turn, had a negative impact on the balance sheets of banks that held these bonds in their portfolios. The difficulties faced by some governments in financing themselves in the market also affected the ability of banks from these same countries to obtain financing in wholesale markets.