Britain's finance minister George Osborne
(AFP/File - Vincenzo Pinto) The coalition government is looking at doubling the term to take advantage of historically-low yields on British gilts. It wants to borrow money cheaply from institutional investors that it can pay back over an extended period."This is about locking in for the future the tangible benefits of the safe haven status we have today," the source said. "The prize is lower debt interest payments for taxpayers for decades to come. It is a chance for our great grandchildren to pay less than they otherwise could have expected to thanks to this government's fiscal credibility."Demand for current British gilts was being driven by the Bank of England's asset purchase programme, known as quantitative easing, and which is aimed at boosting economic growth in Britain."The Bank of England is the fastest growing purchaser of gilts and with no sign of the BoE shrinking its balance sheet any time soon, there is a sound logic to Osborne striking while the iron is hot," said Kathleen Brooks, research director at trading site Forex.com.The central bank last week maintained the level of its asset purchasing scheme aimed at boosting lending among commercial banks - at 325 billion pounds (388 billion euros, $514 billion).BoE policymakers also held its key interest rate at 0.50 percent, with Britain at risk of fresh recession and three years after it slashed BoE borrowing costs to the current record-low.British benchmark 10-year gilts were meanwhile offering yields of 2.3 percent on Wednesday - a level that is below countries with lower budget deficits than Britain. The longer the life-span of a bond, the higher the yield paid out by the government."It is totally understandable, from the government's point of view, that it would want to lock in a low yield for a long-term," said Rabobank analyst Jane Foley."No doubt the Treasury will do a proper assessment of demand before travelling down this route."Current British gilts are also in demand from private investors reassured by the Conservative-Liberal Democrat government's efforts to slash its debt and avoid the severe troubles that have rocked the eurozone.Neil MacKinnon, an economist at financial group VTB Capital, said that bond demand was solid because Britain had managed to maintain its gold-plated AAA credit rating."There is good institutional demand, given the AAA rating, as the markets perceive a low probability of default and remain confident in the government's fiscal policy," he told AFP.Britain's National Association of Pension Funds forecast a low take-up of 100-year bonds among its members, however, owing to the time-frame involved."Pension funds are looking for 30, 40 and 50-year ... debt, and would much rather the government issue more of those," NAPF chief executive Joanne Segars said in a statement."Even if a 100-year bond were attractive in duration, there would be a question mark over whether it would yield a strong enough return for investors."- AFP/fa/de
Britain to unveil 100-year government bonds?
Britain will next week unveil plans for issuing state-bonds lasting 100 years, a Treasury source said on Wednesday, as the government looks at locking in low interest rates.Britain's finance minister George Osborne will use his annual budget statement on March 21 to launch a consultation on century-long government bonds, or gilts, the source told AFP.Chancellor of the Exchequer Osborne may also unveil plans for perpetual government bond loans for the first time in almost 100 years, the source added.Britain last issued perpetual bonds, on which the capital is never repaid but interest is charged forever, following the end of the First World War in 1918."The chancellor is expected to announce" its plans for gilts in the budget statement next Wednesday, the source told AFP. Currently, Britain's gilt with the longest maturity is 50 years. Britain's finance minister George Osborne
(AFP/File - Vincenzo Pinto) The coalition government is looking at doubling the term to take advantage of historically-low yields on British gilts. It wants to borrow money cheaply from institutional investors that it can pay back over an extended period."This is about locking in for the future the tangible benefits of the safe haven status we have today," the source said. "The prize is lower debt interest payments for taxpayers for decades to come. It is a chance for our great grandchildren to pay less than they otherwise could have expected to thanks to this government's fiscal credibility."Demand for current British gilts was being driven by the Bank of England's asset purchase programme, known as quantitative easing, and which is aimed at boosting economic growth in Britain."The Bank of England is the fastest growing purchaser of gilts and with no sign of the BoE shrinking its balance sheet any time soon, there is a sound logic to Osborne striking while the iron is hot," said Kathleen Brooks, research director at trading site Forex.com.The central bank last week maintained the level of its asset purchasing scheme aimed at boosting lending among commercial banks - at 325 billion pounds (388 billion euros, $514 billion).BoE policymakers also held its key interest rate at 0.50 percent, with Britain at risk of fresh recession and three years after it slashed BoE borrowing costs to the current record-low.British benchmark 10-year gilts were meanwhile offering yields of 2.3 percent on Wednesday - a level that is below countries with lower budget deficits than Britain. The longer the life-span of a bond, the higher the yield paid out by the government."It is totally understandable, from the government's point of view, that it would want to lock in a low yield for a long-term," said Rabobank analyst Jane Foley."No doubt the Treasury will do a proper assessment of demand before travelling down this route."Current British gilts are also in demand from private investors reassured by the Conservative-Liberal Democrat government's efforts to slash its debt and avoid the severe troubles that have rocked the eurozone.Neil MacKinnon, an economist at financial group VTB Capital, said that bond demand was solid because Britain had managed to maintain its gold-plated AAA credit rating."There is good institutional demand, given the AAA rating, as the markets perceive a low probability of default and remain confident in the government's fiscal policy," he told AFP.Britain's National Association of Pension Funds forecast a low take-up of 100-year bonds among its members, however, owing to the time-frame involved."Pension funds are looking for 30, 40 and 50-year ... debt, and would much rather the government issue more of those," NAPF chief executive Joanne Segars said in a statement."Even if a 100-year bond were attractive in duration, there would be a question mark over whether it would yield a strong enough return for investors."- AFP/fa/de
Britain's finance minister George Osborne
(AFP/File - Vincenzo Pinto) The coalition government is looking at doubling the term to take advantage of historically-low yields on British gilts. It wants to borrow money cheaply from institutional investors that it can pay back over an extended period."This is about locking in for the future the tangible benefits of the safe haven status we have today," the source said. "The prize is lower debt interest payments for taxpayers for decades to come. It is a chance for our great grandchildren to pay less than they otherwise could have expected to thanks to this government's fiscal credibility."Demand for current British gilts was being driven by the Bank of England's asset purchase programme, known as quantitative easing, and which is aimed at boosting economic growth in Britain."The Bank of England is the fastest growing purchaser of gilts and with no sign of the BoE shrinking its balance sheet any time soon, there is a sound logic to Osborne striking while the iron is hot," said Kathleen Brooks, research director at trading site Forex.com.The central bank last week maintained the level of its asset purchasing scheme aimed at boosting lending among commercial banks - at 325 billion pounds (388 billion euros, $514 billion).BoE policymakers also held its key interest rate at 0.50 percent, with Britain at risk of fresh recession and three years after it slashed BoE borrowing costs to the current record-low.British benchmark 10-year gilts were meanwhile offering yields of 2.3 percent on Wednesday - a level that is below countries with lower budget deficits than Britain. The longer the life-span of a bond, the higher the yield paid out by the government."It is totally understandable, from the government's point of view, that it would want to lock in a low yield for a long-term," said Rabobank analyst Jane Foley."No doubt the Treasury will do a proper assessment of demand before travelling down this route."Current British gilts are also in demand from private investors reassured by the Conservative-Liberal Democrat government's efforts to slash its debt and avoid the severe troubles that have rocked the eurozone.Neil MacKinnon, an economist at financial group VTB Capital, said that bond demand was solid because Britain had managed to maintain its gold-plated AAA credit rating."There is good institutional demand, given the AAA rating, as the markets perceive a low probability of default and remain confident in the government's fiscal policy," he told AFP.Britain's National Association of Pension Funds forecast a low take-up of 100-year bonds among its members, however, owing to the time-frame involved."Pension funds are looking for 30, 40 and 50-year ... debt, and would much rather the government issue more of those," NAPF chief executive Joanne Segars said in a statement."Even if a 100-year bond were attractive in duration, there would be a question mark over whether it would yield a strong enough return for investors."- AFP/fa/de
RELATED NEWS
