Calm Down Fraser
Fraser Nelson is getting very excited over at the Spectator blog about the ‘failure’ of a gilt auction today. I say ‘failure’ as the Debt Management Office did manage to issue £1.6bn of forty year debt at an interest rate of 4.5%. Not bad.
I suspect the auction ‘failed’ (i.e. sold only 93% of the allotted £1.75bn) for two reasons. First off it was a forty year issue. Second, Mr King’s comments yesterday.
But given how dependent Brown is on being able to bum money from the City, a so-called buyers’ strike (ie, when investors say ‘we don’t want your crappy debt’) will be hanging over him like the sword of Damocles.
I’m not seeing this ‘buyers’ strike’. The yield on ten year government debt – which I keep saying is the think to watch – did rise after the ‘failed’ auction. It then fell back to its previous level of 3.32%. At the time of writing it is now down on the day – i.e. it is cheaper for the UK government to borrow now, than it was yesterday.
Sorry Fraser, don’t think we’re calling the IMF.