Uk Wants To Borrow On 100-Year Low Interest Bonds

[inflating]

http://www.ft.com/cms/s/0/0e563a50-6d43-11e1-ab1a-00144feab49a.html#ixzz1p2OFiaOO

Borrow for a century, or even for ever, and there is less risk of Britain being hit by a refinancing crisis. The UK can use its current standing to secure cheap money for the next 100 years.

UK Treasury considers super long-term borrowing plan

13 March 12 22:00 GMT

The government is considering issuing a new long-term bond it hopes will cut the country's interest payments for years, the BBC has learned.

At present, the UK government, like others, issues bonds - a form of IOU - which pay interest before being paid back after a fixed term.

A long-dated bond typically gives the government 30 years to repay in full.

The new plan is looking at issuing bonds with a 100-year repayment date, or even longer.

In his Budget next week, Chancellor George Osborne will announce that he will consult on creating a new "super-long" gilt that could even be issued with no set redemption date.

The theory is that these super long-term gilts would allow the government to lock in the current record low interest rate for a very long time.

If the bond proved popular with investors, future governments would pay less debt interest for years to come.

Savings

Treasury officials described this is like the country taking out a low rate fixed-term mortgage.

They said official figures reveal that the low cost of long-term interest rates will save the country £20bn in debt interest over the next five years.

The last perpetual loan was taken out to cover the cost of World War I.

The chancellor is accompanying Prime Minister David Cameron on his trip to the US where he will have meetings with his counterpart Timothy Geithner and head of the IMF Christine Lagarde.

Officials travelling with him say that next week's Budget has still not been finalised.

There will be another meeting of the coalition's governing "quad" on Friday.

The quad is the name given to meetings of the prime minister and chancellor from the Conservative side and the deputy prime minister and the chief secretary to the Treasury from the Liberal Democrat side.

One source said "things are still moving around" but insisted that many issues had been resolved.

The Treasury has to inform the independent Office for Budget Responsibility of its key tax and spending decisions by the end of Friday in order that the OBR can factor them in to its economic forecasts.

The Treasury is expected to spell out the details of its credit easing plan - to underwrite loans for small businesses - next Tuesday - on the eve of the Budget.

http://www.bbc.co.uk/news/mobile/business-17361330

Edited March 13, 2012 by inflating

[bmf]

Just read this myself. An attempt to kick the can right down the road. Seems a bit panicky. Will be interested to see our next budget and the market response to this if it goes ahead. Who is going to agree to this when the UK is already the most indebted country in the Western world?

[Giraffe]

Crack addicts.

So my children's children's children's children can pay for today's excess.

[Sir Harold m]

Be fair if they get away with it then it is a completely sensible and rational thing to do.

[Giraffe]

Be fair if they get away with it then it is a completely sensible and rational thing to do.

Yeh, you're right. I think we should go for a 1000 year bond.

[long time lurking]

It smells stinks of desperation

Edited March 13, 2012 by long time lurking

[neil324]

Over subscribed on the day maybe?

[man o' the year]

DEBT will eat itself.

[inflating]

Who would be in the market for a 100 year bond?

One Mr M King, by any chance?

[thecrashingisles]

Coming soon: New improved HomeBuy. Put down a 1% deposit and take out a 100 year 99% mortgage backed by the government. Repayments will only be made when your salary goes above the affordability threshold like a student loan.

Edited March 13, 2012 by thecrashingisles

[tim123]

been done before. Twe government issued "war" bonds with no repayment date.

70 years later HMG steadfastly refuses to redeme them

tim

Edited March 13, 2012 by tim123

[Traktion]

Crack addicts.

So my children's children's children's children can pay for today's excess.

Exactly. It's disgusting.

Where is the consent from the unborn? They are born into debt slavery.

Not that a lack of consent from the already living bothers them, I suppose... :angry:

Edited March 13, 2012 by Traktion

[Ash4781]

I am not sure the unintended consequences will be a barrel of laughs. I imagine some pension funds would pick these up.

[57percent]

As much as the principle of this seems disgusting, there's not really much going on here.

The fact that our kids, or kid's kids will be bailing us out is finally admitted. We'd only be rolling over 50 year bonds anyway.

However, some of the total rubbish I've just heard on the radio (5Live) makes me think these financial reporters don't have a clue. I've heard "we'd be locking in today's low interest rates" and "if we make them perpetual gilts, we'd never have to pay back the money, which will save the government billions" !!!!!

Now, who the fck is going to buy a 100 year gilt at 0.5%, or even anything remotely related to today's interest rates???

And who will buy a perpetual gilt for the same rate as a redeemable???

How are people so stupid to think that somehow this will save us?

It seems to me there's some good reasons to have mixture of short and long dated gilts (and by long dated, I mean 25y), but to pretend that it's gonna save us billions, or even that making them perpetual, so we never pay back the principle, somehow reduces the debt is utter, utter nonsense !!

[inflating]

Now, who the fck is going to buy a 100 year gilt at 0.5%, or even anything remotely related to today's interest rates???

Well that's what I thought, why would even a pension fund want to lock in sod all interest?

[neil324]

As much as the principle of this seems disgusting, there's not really much going on here.

The fact that our kids, or kid's kids will be bailing us out is finally admitted. We'd only be rolling over 50 year bonds anyway.

However, some of the total rubbish I've just heard on the radio (5Live) makes me think these financial reporters don't have a clue. I've heard "we'd be locking in today's low interest rates" and "if we make them perpetual gilts, we'd never have to pay back the money, which will save the government billions" !!!!!

Now, who the fck is going to buy a 100 year gilt at 0.5%, or even anything remotely related to today's interest rates???

And who will buy a perpetual gilt for the same rate as a redeemable???

How are people so stupid to think that somehow this will save us?

It seems to me there's some good reasons to have mixture of short and long dated gilts (and by long dated, I mean 25y), but to pretend that it's gonna save us billions, or even that making them perpetual, so we never pay back the principle, somehow reduces the debt is utter, utter nonsense !!

The BOE?

[57percent]

Well that's what I thought, why would even a pension fund want to lock in sod all interest?

If you were buying a 1y gilt, today's interest rate, or similarly safe rates, would be very relevant, but if you were buying a 50/100y gilt, you'd want something close to historic averages and would take very little notice of current rates.

[inflating]

If you were buying a 1y gilt, today's interest rate, or similarly safe rates, would be very relevant, but if you were buying a 50/100y gilt, you'd want something close to historic averages and would take very little notice of current rates.

Exactly

so I just don't get it, unless it's as per my earlier post and Nei;'s : buyer = BoE???

[Errol]

Clearly more debt is exactly what we need. And, as luck would have it, we have a handy printing press with which to print up the money to buy it.

[Chuffy Chuffnell]

Just another piece in the "printing money to pay for government expenditure" jigsaw.

We are living the dream.

[Chuffy Chuffnell]

Clearly more debt is exactly what we need. And, as luck would have it, we have a handy printing press with which to print up the money to buy it.

All rise for the Bank of England anthem!

The French must be kicking themselves. I mean how stupid were they to give up their own currency?

[libspero]

Well that's what I thought, why would even a pension fund want to lock in sod all interest?

Same here.. makes no sense.

I can't see even Merv could justify buying that (without admitting that the only cost of borrowing he is trying to reduce is that of the government).

[neil324]

They are going to print and buy these them selves aren't they, no way would anyone else touch these with a barge pole, except pension funds who have to.

Hold Sterling?

[The Knimbies who say No]

Same here.. makes no sense.

I can't see even Merv could justify buying that (without admitting that the only cost of borrowing he is trying to reduce is that of the government).

Seat in the Lords up for grabs?

[MRMX9]

If we cannot balance the books now when we have 5 or 6 working age people for every pensioner how are we going to manage when there are only 2 per pensioner in 20 years time.

Let alone the fact that many of these pensioners will be retiring with no private/final salary pension and possibly still be paying off a mortgage or renting (so will therefore need housing benefit). And most will live until 85, 90 or even 95?

The demographics are frightening - how are we ever going to pay off the debt when the deficit can only grow if we maintain the NHS and current state pensions?