UK borrows at negative rates

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union purse and pounds

Today, the UK government has sold a bond (government gilt) with a negative yield.

What does this mean? It means that the government is being paid to look after investors money, whilst the investors have agreed to get back a little less than they have lent to the government!

Japan, Germany and some other European countries are also selling negative yielding debt.

Today’s UK Government debt sale resulted in £3.75 billions of gilts, being sold at an average yield of -0.003% and a maturity date of July 2023. Yields for the two-year benchmark gilts (which are particularly sensitive to the mood of the Bank of England’s ‘hawks and doves’) fell to a record low of -0.051% last week.

The Bank of England cut interest rates to a record low of 0.1% in March and began buying 200 billion pounds of assets, largely gilts, to help the economy and the blunt the spike in yields seen during the financial panic at the start of the coronavirus. Some analysts see a possibility that the Bank of England will cut it’s main interest rate to below zero during the latter part of 2020. However, others are more doubtful as they see a consequential risk in the solvency of some banks and building societies, who would find it very challenging to apply the necessary ‘charges’ to retail customers credit balances.

Every cloud has a silver lining: Strong demand for UK national debt is a relief for the government which is likely to incur record levels of borrowing to support the economy during and long after the coronavirus crises

 

Our news posts are intended as financial education, not financial advice, and are only suitable for UK residents. Always take professional, independent advice before acting on any information.

Investment & Retirement Solutions Ltd is authorised and regulated by the Financial Conduct Authority.

The value of investments and income from them can fluctuate (this may partially be the result of exchange rate fluctuations) and investors may get back less than the amount invested. Past Performance is not a guide to future performance.

Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.

The Financial Conduct Authority does not regulate taxation and trust advice, will writing, advice on deposit accounts, some types of offshore investment, some aspects of buy to let mortgages, commercial finance or offshore mortgages.

Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. Unless specifically stated otherwise, our posts do not allow for additional taxation powers held by the devolved governments. 

All information is believed to be correct at the time of publication. E. & O. E.

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Notices:

Our posts are intended as financial education and financial information, not as financial advice, and are only suitable for UK residents. Always take professional, independent advice before acting on any information.

Investment & Retirement Solutions Ltd is authorised & regulated by the Financial Conduct Authority.

The value of investments and income from them can fluctuate (this may partially be the result of exchange rate fluctuations) and investors may get back less than the amount invested. Past performance is not a guide to future performance.

Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.

The Financial Conduct Authority does not regulate taxation and trust advice, will writing, advice on deposit accounts, some types of offshore investment, some aspects of buy to let mortgages, commercial finance or offshore mortgages.

Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. Unless specifically stated otherwise, our posts do not allow for the additional taxation powers which may be levied by the devolved governments.

All information is offered in good faith and is believed to be correct at the time of publication however it may be superseded following publication. E. & O. E.

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