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>> No. 6520 Anonymous
12th August 2016
Friday 3:08 pm
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The Treasury’s Debt Management Office this morning sold debt at a new record low interest rate, underlining the massive appetite from investors for British Government bonds in the wake of the Brexit vote and sparking fresh calls for the Chancellor to take advantage by ramping up its infrastructure investment.

The DMO sold £850m of an index-linked Gilt (or bond) that matures in 2036 at a yield of minus 1.72 per cent.

When the price of a bond rises its yield (or effective interest rate) falls, meaning that investors paid so much for this particular Gilt that the yield turned negative.

The negative yield means the buyers are effectively paying the Government for the privilege of lending to it.


If people are paying to lend the country money is there any reason we shouldn't borrow shitloads and go on a massive spending spree
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>> No. 6522 Anonymous
12th August 2016
Friday 4:51 pm
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The government absolutely should be taking the chance to make some vital investments and almost everyone outside of the government agrees but that would be too reasonable. Philip 'I do not believe in the money tree' Hammond has indicated that the Tories will continue with Osborne's policies despite it being a largely ideological decision that will ruin finances in the long run with PFI.

Borrowing does come with drawbacks of course. If people are putting money into bonds they are not putting money into private sector lending which is an issue as I'm sure you will imagine.
>> No. 6523 Anonymous
12th August 2016
Friday 5:06 pm
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This fucking board. This is how far I got before getting confused.

>The Treasury’s Debt Management Office this morning sold debt

I've now realised this just means government borrowing. I even understand 'selling bonds'. But 'selling debt' has usually to me meant selling the debt that debtors have yet to pay back to you to another party so that they then become the creditor. For fuck's sake.
>> No. 6524 Anonymous
12th August 2016
Friday 7:11 pm
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This is definitely a case of investors finding the UK irresistible and nothing to do with the Bank of England's new round of quantitative easing, right?
>> No. 6525 Anonymous
12th August 2016
Friday 7:49 pm
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My understanding is that people are buying bonds at a negative yield with the expectation that the Bank of England will buy them in future at an even higher price (and even more negative yield) as part of its quantitative easing strategy.

Somehow this is supposed to stimulate the economy...
>> No. 6526 Anonymous
12th August 2016
Friday 9:18 pm
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Some are. Many are put off by bond prices being low so they put their money elsewhere though.

The Bank just bought tonnes of government debt, freeing investors to put money in the rest of the economy.
>> No. 6527 Anonymous
13th August 2016
Saturday 8:16 am
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These gilt are mainly bought by very large investment funds such as pension funds as part of a hedge fund.

They can put so many millions into this knowing that they'll lose a couple of percent on it, but it will keep the total value of the fund higher if the stock market goes tits up in the future.
>> No. 6528 Anonymous
13th August 2016
Saturday 9:05 am
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I'm not entirely sure that's right. I've been in contact with a fair few fund managers post-Referendum and they've said they're not changing their stance on gilts because the market isn't big enough for them to take a significant holding in it, so the effects on their performance would be negligible, even when we're talking multi-asset funds in the old defensive managed sector.

The main holders are annuity providers and life offices, for solvency reasons, and final salary pension schemes to offset their liabilities. Oh, and fixed interest funds which specifically invest in gilts.

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