Yesterday's gilt sale had the highest level of demand for government bonds in 9 months. The auction is at odds with news that gilt yields were set to "rocket".
City AM report today that:
“A key auction of government bonds was yesterday heavily oversubscribed, in a tentative sign that investors are still keen to buy UK debt despite fears over the country’s credit-worthiness.
“The Debt Management Office (DMO) said it had received bids for 2.68 times the £4bn of five-year gilts on offer, equivalent to the highest level of demand for government bonds in nine months.”
The average yield was 3.08 per cent. As the graph below shows, this is a cheap price in the context of the last 12 years and somewhat at odds with reports in Tuesday’s Evening Standard that gilt yields were set to “rocket” and news that Pimco, the world’s biggest bond fund, was cutting its holdings of US and UK debt.
David Prosser in the Independent, “And yet for all the panic in the wake of the PBR over Britain’s treasured AAA credit rating, Pimco is very much in the minority at putting the chances of a downgrade so high.”
But FT Alphaville today set why the auction may not contain such good news:
“The real test of demand for gilts is now widely expected to come next Wednesday, with the £2.25bn 4.25 per cent 2049 auction. That particular offering has fewer of the supportive traits of this week’s one.”
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9 Responses to “Government debt not “rocketing” yet”
Anon E Mouse
Guido – My biology may not be the best but I’m sure that’s not the right orifice for the ejection of eggs from a chicken…
Will – I thought you worked at the treasury for four years. What exactly did you do there? What educational level of maths did you achieve to get that job exactly?
The interest payments on Browns debt alone is estimated to be 60 to 70 billion by the middle of next year…
Richard Blogger
Anon.
Guido is right, a chicken only has one hole at the back for both defecation and egg laying. It is called the cloaca. Internally there are two ducts, one for the egg and the other is the intestines, but externally there is just one hole.
Whether you call this hole a bum or cloaca is a matter of decorum I guess.
Anon E Mouse
Richard – I bow to your greater knowledge of the orifices of chickens…
What's the answer, George? | Left Foot Forward
[…] The Tories also talk about Britain’s “debt crisis” when the UK went into the recession with lower levels of debt than most other OECD countries. Indeed, Meanwhile, gilt yields are near record lows. Despite Osborne’s fears, the yield from 5-year British Government Securities (gilts) remain below 3 per cent – well below their long-run average. […]