Duncan’s Economic Blog

Calm Down Fraser

Posted in Uncategorized by duncanseconomicblog on March 25, 2009

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.

Fraser says:

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.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: