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Uk Wants To Borrow On 100-Year Low Interest Bonds


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#1 inflating

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Posted 13 March 2012 - 10:13 PM

http://www.ft.com/cm...l#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...siness-17361330


Edited by inflating, 13 March 2012 - 10:14 PM.


#2 bmf

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Posted 13 March 2012 - 10:20 PM

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?

#3 Giraffe

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Posted 13 March 2012 - 10:22 PM

Crack addicts.

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

#4 Sir Harold m

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Posted 13 March 2012 - 10:23 PM

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

#5 Giraffe

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Posted 13 March 2012 - 10:25 PM

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.

#6 long time lurking

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Posted 13 March 2012 - 10:28 PM

It smells stinks of desperation

Edited by long time lurking, 13 March 2012 - 10:29 PM.


#7 neil324

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Posted 13 March 2012 - 10:30 PM

:blink:

Over subscribed on the day maybe?

#8 man o' the year

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Posted 13 March 2012 - 10:31 PM

DEBT will eat itself.
Closer than you think!

This species has amused itself to debt.

#9 inflating

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Posted 13 March 2012 - 10:32 PM

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

One Mr M King, by any chance?

#10 thecrashingisles

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Posted 13 March 2012 - 10:32 PM

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 by thecrashingisles, 13 March 2012 - 10:33 PM.


#11 tim123

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Posted 13 March 2012 - 10:34 PM

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

70 years later HMG steadfastly refuses to redeme them

tim

Edited by tim123, 13 March 2012 - 10:35 PM.


#12 Traktion

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Posted 13 March 2012 - 10:34 PM

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 by Traktion, 13 March 2012 - 10:34 PM.

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#13 Ash4781

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Posted 13 March 2012 - 10:43 PM

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

#14 57percent

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Posted 13 March 2012 - 11:17 PM

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 !!

#15 inflating

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Posted 13 March 2012 - 11:23 PM

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?




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