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Gilts and guilt

Robert Peston | 15:01 UK time, Wednesday, 25 March 2009


This government has suffered its first setback in financing its eye-wateringly large borrowing needs.

Mervyn KingAnd what gives resonance to the flop of a relatively modest sale of gilts or government bonds is that it comes a day after Mervyn King warned the Treasury against further augmenting public-sector borrowing through an additional fiscal stimulus (via tax cuts or an increment in public spending).

What's happened is that the Debt Management Office - an offshoot of the Treasury - had wanted to raise £1.75bn through the sale of a 40 year bond (this is the equivalent of the government borrowing for 40 years), but received acceptable bids for only £1.63bn.

There was a shortfall of just over £100m.

Now £100m may seem trivial in the context of the government's overall borrowing needs: the Debt Management Office reckons it will have to sell £147.9bn of gilts in 2009-10, to finance the public-sector's ballooning financing requirement; and some analysts fear that gilt sales may in the end have to be as much as £200bn next year, such is the deterioration in the public finances.

But it's because the government has to borrow so much, that any such flop is unnerving.

This auction is the first time that there has been less than 100% demand in a sale of gilts since 2002, and in that case the auction was of index-linked or inflation-proofed bonds. There hasn't been a flop of a conventional gilts auction since 1995.

So what's going on? And how alarming is the failure?

Well it would be wrong to read too much into one glitch of this sort. In the past 11 months, the Debt Management Office has successfully sold a colossal amount of new government bonds, well over £140bn, without encountering difficulties.

An accident was perhaps bound to happen at some point.

But it would be equally unwise to dismiss the flop as a non-event.

The important question is why investors' appetite for government bonds has been reduced.

The main reason appeared to be the uncertainty created yesterday by the governor of the Bank of England about the volume of gilts the Bank of England would buy through its Quantitative Easing programme.

He told MPs on the Treasury Select Committee that the Bank would reduce its purchases of gilts if there was evidence that the threat of deflation was being lessened.

In that context, the disclosure yesterday that inflation had risen on the Bank of England's official target measure - the Consumer Price Index - prompted some analysts to conclude that deflationary risks may have been overstated just a bit and that the Bank may therefore be a little more modest in its purchases of gilts than had been expected.

To state the obvious, if the Bank were buying fewer gilts there would be more for ordinary investors to buy - and their appetite for UK sovereign debt isn't unlimited (though, as it happens, the Bank was never going to buy 40-year gilts).

Which, of course, is why the governor's publicly expressed anxiety about the magnitude of the government's prospective borrowing needs is so resonant.

It would probably be silly to argue that Mervyn King is to blame for the flop of the gilts auction.

The painful fiscal reality is to blame, or forecasts such as that of the International Monetary Fund that the budget deficit next year will be equal to 11% of GDP, a record-breaking funding gap.

That said if the prime minister had hopes of stimulating the economy further through spending and tax cuts, he may feel that investors (or what you might call Mr Market) are ganging up with the governor to dash those hopes.


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  • Comment number 1.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 2.

    Two conclusions;

    1. A vote of no confidence in the current, and future, fiscal position of Great Britain plc

    2. A statement of where investors believe British inflation is heading.

    Not good.Completely understandable. But not good.

  • Comment number 3.

    Let me see if I’ve got this right. After all the huffing and puffing, Brown will go into the next election with the Brown stuff hitting the fan regardless?

  • Comment number 4.

    Gordon can 'Shoot the Messenger', he can quibble with rude boy Hannan's shout of 'The Emperor Has No Clothes', but as Mrs Thatcher said, "You can't buck the market.."

  • Comment number 5.

    If the government can't sell gilts to finance its colossal debt how long before the IMF have to bail us out? Perhaps we need them to start to sort out the mess just as they did with Healey in the 70s

  • Comment number 6.

    I don't give a **** about gilts coz I don't understand them and I still don't even after reading your article - but I wouldn't be keen on buying anything at the moment that I wasn't going to get back from the UK govt for 40 years.

    Like many other bloggees what I do care about is the fact that I had to sit down with 10 people this week and lay them off. What i do care about is that our industrial estate has no traffic on it. What I do care about is that even enquiries are drying up now. What I can't understand is talk that sales have only dropped 3% yet everyone I talk to is talking of a completely empty or nearly empty order book. What I do care about is that Insolvency practitioners are telling me that the worst is coming in the next couple of months - we haven't even got there yet. What I do care about is that most businesses I speak to are hanging on by their finger tips and with no sales can't hang on much longer. What I do care about is how this country can survive. What I do care about is what kind of world are my children going to be growing up in. What I do care about is how this country can sustain the population if everything does go forward as badly as some people think it might. What I do care about is how we feed ourselves, power ourselves, rebuild our worldwide economic might. Gilts may be part of the picture but for me they are a small part.

    What do you care about Mr Peston?

  • Comment number 7.

    Bad news for the Treasury might - depending on the cause - be good for the private sector:

    Or it may be good news for savers... if gilt rates go up, you should be able to get a better interest rate on long-term deposits (or annuities).

    There are quite a few different effects here for us to try to separate - stockmarket movements of the last few days, the new US banking plan and other data all indicate that we may be at a turning point in the crisis. Things could easily go either way from here.

  • Comment number 8.

    'are ganging up with the governor to dash those hopes.'

    Thank goodness someone is ganging up to dash those hopes.

    I hope their is such thing as reincarnation as GB will need to lose his pension in the next life as well as this to make up for all he has done.

  • Comment number 9.

    This surely cannot come as a surprise to anybody. The Governor gave a stark warning to a Government that is not willing to listen. It is a question of confidence. Basically, the public finances and private finances have become a mess due to excessive borrowing. The Government is trying to borrow more. Do you give an alcoholic another drink?

  • Comment number 10.

    'It would probably be silly to argue that Mervyn King is to blame for the flop of the gilts auction.'

    Powers of suggestion robert ;-)

  • Comment number 11.

    This comment is awaiting moderation. Explain.

  • Comment number 12.


    No doubt that swerving Merv's comments yesterday will have had some effect and quite rightly.

    It maybe that actually investors/market are also getting spooked with the prospect of STAGFLATION (quick ref: rather than deflation given yesterday's numbers (and the prospect of interst rates going up much quicker than thought to combat inflation).

    The Keynesian approach so enthusiastically followed by those setting policy may well be taking a 'kick in the ....'.

    The problem is meeting the economic downturn with panic measures and QE as we have witnessed may well be setting off uncontrollable events in the wider economy with disastrous consequences.

    Whatever/whetther its deflation or stagnation the PM resembles increasingly the Canute/Nero profile.

    What people have to realise is that the Government lost control of the economy several years ago not last year, and not the year before that.

    It's been obvious but too many were blinded either by greed or ignorance.

    I think unless there is a change of government the sale of gilts will get increasingly more difficult amongst other things........for one, UK real estate is still way too high (see various Economist articles) and has much further to drop which will act as a drag against employment and growth...

    We just need to get real and accept the pain. The quicker we do the better i.e. the quicker we come out the other side......

  • Comment number 13.

    Is Mr Brown on a farewell World Tour?

    For all our sakes, I hope so!

  • Comment number 14.


    I’d like to think that the risk of inflation was low and that the UK can retain its AAA status, but I’m not sure that events in the real world mirror the world of politics, or even the parallel world of fantasy finance.
    I’m currently experiencing quite strong inflation. Most of my input costs are rising, as the majority of my raw materials are priced in dollars. My overhead costs are rising year on year and will suffer a further guaranteed rise when the planned N.I. increase kicks in. The few U.K. suppliers that I use are suffering from the same inflationary effects.
    Any policy which further undermines the strength of Sterling without stimulating demand is likely to prime the inflation pump further.

  • Comment number 15.

    Even the compliant markets have had enough of Brown and his failed policy. He can trot around the world trying to be the planets god but that is simply like allowing the arsonist to teach the Fire Service how to put fires out.

    The man needs a white coat and a secure residence.

    Have we NO MP's with the guts to end his fantasy !

    Had enough

  • Comment number 16.

    Mervyn King said initially that any fiscal stimulus would have to be temporary so temporary it will be.

    The fears initially that Brown would not be able to stop when the printing presses started to roll were well founded.

    Mervyn King must have realised this has has well and truly
    stopped Brown in his tracks. Others have taken heed and followed suit.

    Brown may well try and save face on his world tour but it would be suicidal to go against the Bank of England which has now gone public on this issue.

    This is an unprecedented move by the BOE so in the end common sense has prevailed.

  • Comment number 17.

    so, king does a peston.

  • Comment number 18.

    Fiscal and monetary policy makers not seeing eye to eye?

    I'm amazed that nobody has started speaking about 'the commanding heights of the economy' as a fiscal policy.

    Oh, we have no utilities left to nationalise, I forgot.

  • Comment number 19.

    Why is no one asking what the deficit is increasing so fast?

    Or how did the UK finances fall apart so fast?

    Brown and Darling seem to think borrowing will solve the problem and the property market going up will be good but that is how the economy got into this mess in the first place.

  • Comment number 20.

    This is probably just a glitch in the borrowing cycle, but should reinforce yesterday's warning from Mervyn King. With an election due in 2010, whatever party was in power, this years budget should be a give-away. Mervyn King told us yesterday that we cannot afford that. I would respect Gordon Brown far more if he now went for prudence.

  • Comment number 21.

    This does raise concern and we all knew it was going to happen sooner rather than later . The reality is we urgently need to re address the massive overspend in the public finances . Hard to believe the public sector will get 2.5 % pay increase this year with current conditions , one of my ex employer is talking about a 15% pay cut ...
    Question when no third parties want our guilts at any price , how will the government get its money ?? Taxes ?? IMF here we come . Watch the feathers fly with the unions when real job cuts (Not early retirements)hit the public sector in the next 12 months.

  • Comment number 22.

    Please could you find the time or better still ask one of your business collegues to do an article on the Business rates in london and the UK in general.
    The government has allowed, in these times of Hand to mouth existance,the business rates to be increased ,without any warning or arbitration.In my particular case the increase is 100% and other small businesses in the SW18(Wandsworth) area where i have my business have been increased by upto 300%.What does the government mean when they proclaim they what to help small business?.
    Rent day/quater day is one thing and having just seem Emma Simpsons article re a shop closures in Fulham.Just wait till the local authority begins the collection of the increased Business rates.
    All business rates that are collected go to central government and not spent within the collecting borough.
    I fear we are all doomed! HELP us please Robert!

  • Comment number 23.

    The UK is in bed with the US at the moment and the risk/reward ratios are being tainted by the flip-flopping of the US Congress trying to pass retrospective laws and playing soundbite to placate the US public.

    Although GB and co havent been that bad they also have been pretty vocal and are being tainted by this.

    Investors are discounting any issues for the added political risk and have decided the risk/return ratios arent right.

    BO and GB must be beginning to realise that while one man/one vote gets you into office, it's a very small minority of persons in the country that actually help you run the country. The same people that BO and GB have been castigating in public since this mess began.

    You can't, for example, spend months castigating pension and hedge fund managers and the like and then expect them to gobble up your wares without heavily discounting them. Especially if the product you're peddling isnt all that good to start off with i.e. the health of your finances arent the best.

  • Comment number 24.

    A 40 year bond. So, it won't just be us and our children paying for this, it'll be our grandchildren too!

  • Comment number 25.

    One of the reasons for the failure might have been the publicity given to this speech everywhere ... apart, of course on the BBC....

  • Comment number 26.

    And so it begins. Brown is our very own Mugabe.

  • Comment number 27.

    Straws in the wind, perhaps, and winds may change: but the straws all appear to be blowing one way.

    Presumably, if the Goverment can't "sell" its bonds at the current price then, if it wants to borrow, it will have to offer better terms. The cost to the taxpayer of servicing the debt will rise accordingly.

    Perhaps Mervyn King knew how close we were to the edge of this abyss when he spoke yesterday.

  • Comment number 28.

    Poor old Merv wonder he's at odds with the treasury.HM gov is spending that much he can't print the extra quids quick enough !

  • Comment number 29.

    Yes it would be silly to argue that Mervyn King is to blame for the flop of the gilts auction but that won't stop Crash and the rest of the Commissariat from blaming him. They'll blame anyone but themselves.

    Watch this . It's brilliant. I'm no Tory but I take my hat off to this bloke.

  • Comment number 30.

    Investors will not want to buy British debt and they will not want to buy US debt as well. The Chinese are already making rumblings about dumping the US Dollar as the worlds reserve currency.

    [Unsuitable/Broken URL removed by Moderator]

  • Comment number 31.

    I'm sure the moderators are having a siesta.........ah well !

  • Comment number 32.

    Calling Number 10. Calling Number 10. Your time's up.

  • Comment number 33.

    Robert. Not a terribly newsworthy item. Incomplete sales of gilts is really just a sign of less than stable times in the global money markets. Personally I feel the Government did extraordinarily well to sell over 93% of the issue. They were 40 year bonds after all.

    Furthermore, "government borrowing for 40 years" is emotive. That is the date that they MUST pay back the holders but there is nothing to stop the government redeeming them earlier if fortunes change - as they will.

    I feel that you are over dramatising a relatively unimportant event.

    As Michael Winner oft says " Calm down, calm down"

  • Comment number 34.

    Good old Crash....he'll get tax cuts all right but in the wrong direction(i.e.the revenue stream-or should that be re-named trickle ?).Things are warming up on the lay off front.Expect more big announcements soon.I estimate we've only just begun entering this full blown downturn.

  • Comment number 35.

    The idea that Treasury is having any serious difficulty selling UK Government debt is simply proposterous!

    After years of asking for 40 year Bonds, buyers have confirmed that they don't want really them after all. That's not surprising. Bonds of that much duration would need a substantial risk premium in the coupon that HM Government is not prepared to ask taxpayers to provide. Quite right too!!

    So commonsense has prevailed, and we now can demonstrate that very long-dated Bonds are not wanted. But they'll be loads of buyers for more sensible dated Bonds.

  • Comment number 36.

    For anyone who hasn't heard MEP Daniel Hannan`s comments directed to Gordon Brown yesterday (after his speech to the EU) it is well worth listening to.

    [Unsuitable/Broken URL removed by Moderator]

  • Comment number 37.

    Either they were too cheap or alternatively the market wanted to teach Crash a lesson. Take your own pick.

    One thing is for certain though is that to ensure this doesn't happen again the offers will have to be better in the next year or so and this will cost us all money.

  • Comment number 38.

    There is not much surprise in this to me. Fiscal policy and monetary policy need to be aligned and this is not what the treasury/BOE are doing, hence the Guilts strike.

    More importantly, it seems that it is dawning on Mervyn King that the real plan is to do with saving the Labour party at the expense of the UK.

  • Comment number 39.

    Gordon Brown believes he has a credit card with an unlimited credit limit.

    Mervyn King has decided no more. Pay off the card. Don't let the debt get any higher. Its bad enough now, if Brown continues to borrow we will have no future.

    Gordon Brown is a spendaholic and needs therapy.

    Tax rises are inevitable. Spending cuts are inevitable but there is so much waste where savings can be made.

    The public sector have so far been largely immune to the current increase in unemployment. Tough decisions have to be made.

  • Comment number 40.

    "Whoops, government..... setback..financing its eye-wateringly large borrowing needs. Flop"
    Never let it be said you could not resist an opportunity to talk up the situation. Talk about the glass half-empty!

    Given the difficulty experienced with several recent rights issues I would have thought that a 93% success rate was worthy of some POSITIVE SPIN from you.

    Finally, why is the "BBC Business Editor" so reluctant to report or blog on business issues? There are evidently better qualified and experienced editors already tasked with reporting on the economy.

  • Comment number 41.

    The cracks are getting bigger and bigger. King and Queen exasperated?
    Next stop on the World Tour may well be the IMF.
    Back in the UK for the G20 and tell us fortunate we are to have such a Statesman, skilled and able to use the word "global" more times in a sentence than anyone else.

  • Comment number 42.

    Would you bet on a three legged horse ? This government has now put Britain in that position, and with the incompetent duo , Brown and Darling in charge of the nation's finances, another leg is liable to fall off. Brown's whole object in life seems to be to promote himself as a statesman and to shelter his core vote from the ravages of the recession in the hope he can save the Labour party from annihilation at the coming election whatever the consequences of his irresponsible borrowing. His support within the party and Europe is waning and Obama sees him as an embarrassment .Until he goes there can be no possibility or prospect of any improvement in the ecomomy.

  • Comment number 43.

    "deflationary risks may have been overstated just a bit"

    Delicately put, Robert. More bluntly; this scare has been raised as a smokescreen for inflationary policies, designed to 'reduce' completely unsustainable government debt

    Or indeed, unachievable government debt !

  • Comment number 44.

    A little more info please, Mr Peston? Economics is about money, numbers, supply and demand, at the very least!

    1. Demand. Who normally buys 40 year gilts? I understand that pension annuities are usually covered by UK gilts, but I would like to know for a fact whether Pension Funds/Insurance companies would do this with 40 year gilts.

    2. Quality of Goods Supplied. You could have quickly mentioned that if a Government bond sale is not fully subscribed, it would also suggest that the yields offered are too low. So interest rates had better go up? Which is what we expect if deflation has not transpired, as confirmed by yesterday's official inflation rate, the Office of National Statistics' CPI increase of 3.2%. Nice to see Markets are operating properly again, (they also determine Interest Rates, and it isn't just a Central Bank with a poorly modeled computation of the Money Supply that has the power to establish interest rates).

  • Comment number 45.

    The markets are the friendly pub owner doing us a favour. When we turn up at the pub every day for a year for more of the same please.

    This time the pub owner has given the customer a slap in the face and told him to sort his life out.

    If Gordon can't realise he's not fit to drive, thank god his friends will take away his keys!

  • Comment number 46.

    Mr. Obama, Ms. Pelosi, Mr. Reid, Mr. Geithner: Are you listening, noting what has happened here?

    The T-bill is next, if you think you can finance your way with one trillion dollar deficits.

    The investors won't buy in, and neither will the voters.

    Are you listening, noting what has happened here?

  • Comment number 47.

    Now is the time for those public spending cuts.

  • Comment number 48.

    Whats the point of these blogs if no one can post a reply that can be seen by anyone... its coming up to 2 hours now, god help you if you venture into the world of twitter, which is all about the here and now!!!... considering the size of the BBC, its very unbecoming of a news organisation that one of your reporters posts a blog, but then its impossible to gain an insight to the mood of the replies an insight to the snaphot of opinion until its too late... its like having a conversation with someone this morning, and them replying this afternoon, confusion reigns, snapshot of reaction and feelings are gone... what a waste of Roberts time and effort!!

  • Comment number 49.

    1hr 20mins and I see no posts.....

    Please remove the word BLOG from this page!

    Try SLOG

  • Comment number 50.

    Though shocking, this event was wholly predictable. It will be followed by a further slump in sterling and an unavoidable hike in interest rates, adversely affecting both the economy and millions of individuals. And the root cause of all this is simple - over-spending by government.

    It's Gordon's final failure, and we'll be paying for it for years.

  • Comment number 51.

    brownwatch 433 days.

  • Comment number 52.

    "It would probably be silly to argue that Mervyn King is to blame for the flop of the gilts auction."

    Yeah but you managed to squeeze it in there anyway didn't you? We know who is responsible for the gilts failure. It's the same guy who is responsible for you grandchildren, as yet unborn, are in debt. Same feller who was grinning and gurning and burning inside yesterday, as Dan Hannan ripped him a new exit strategy...

    This is Brown's fault. Labour's fault. Labour have wrecked the country. AGAIN. What's next, the IMF? How will you put a positive spin on that Robert?

  • Comment number 53.

    Nr 6 - one of the most poignant posts for a long time.

    All the macro news masks what is really going on out there and how bad it is.

  • Comment number 54.

    I think King realises that fairly soon the only one buying Gilts will be the BoE with freshly printed money.
    Welcome to Harare on Thames.

  • Comment number 55.

    It is such a shame that you at Brown's Broadcasting Corporation attempt to shift the blame from his gruesome mismanagement of the economy. Mervyn King is obviously aware that Brown's profligate borrowing has left us out of money. The gilts auction failed because the foreign investors who have the option to buy this stuff or not chose not to do so. As a long time bond investor, I can tell you that UK Gilts will remain unattractive until the economic management of this country improves radically. then they will have no need to fear further slides in sterling.

  • Comment number 56.

    47. stanilic:

    "Now is the time for those public spending cuts".

    Absolutely. In fact, there is no other way. If the govt cannot meet its borrowing requirements, HMG is insolvent. So, something has to be done.

    If investors (principally overseas investors) are unwilling to lend to HMG, the ultimate reason is that they cannot see how government spending and income can be brought back into something closer to balance. They need to have a credible route back to balance demonstrated to them. This cannot be done through tax increases - the economy is weakening, and is over-taxed anyway. Ergo, the only way of avoiding bankruptcy is to cut spending. £30bn of cuts is a minimum; £50bn might be nearer to what is required.

  • Comment number 57.


    Thankyou Thankyou for your comments.

    I also run what was a profitable small company. The picture you paint reflects exactly what is happening down here.

    Our turnover is down by about 75%. Many of our competitors are out of business altogether.The abject misery of folk losing jobs and homes is painful to see.

    But to read the business news you would think that its all a little local difficulty and a bit of a laugh.

    If Robert Peston is reading the comments on his blog it would be incredibly helpful if he could answer your questions.

  • Comment number 58.

    I wish Gordon Brown was a football for a month after all this.

    Then everyone could give him a good kicking!

  • Comment number 59.

    I have been posting for over six months that this Government is in danger of not meeting a bloated public sector wage bill. It gets ever nearer.

  • Comment number 60.


  • Comment number 61.

    This is a disaster. Gordon Brown must acknowledge this by resigning and calling an election. To keep going will destroy Labour, which is inconsequential, really, as they have destroyed this country for at least a generation. Funny how things turn out, innit?

  • Comment number 62.

    Hang on - 93%? Isn't that like an exam A* grade? Yes, it is a shortfall, but it is still a good %age take up considering the economic climate. We would expect investment in "safer" gilts - as they give a regular return. But investors are canny, they do not want to get locked into longer term deals at relatively poor rates of return. After all, will there be a market for these in the short term, say 3 years, when investors may be happy to return to buying shorter term higher interest bonds and shares? It would be interesting to see the trend as no doubt more govt bonds will come into the market at varying terms. I don't think we need to worry on one sale.

  • Comment number 63.

    It's appears the three suspects, now they are in separate cells, can't get their act together and are being to squeal. The People's Court wants justice.

    Whilst ringleader Brown goes AWAL drumming up support and more money for his defence, his carefully laid plans begin to unravel; King takes the opportunity and gives evidence to the Crown, seeking a pardon no doubt; Darling seeks refuge by staying quite, since his leader didn't leave him with many spare notes.

    The team from CSI Markets have found evidence of cunning changes to previous Gold Standards with Brown's fingerprint all over them and the DNA of Labour Dinosaurs much in evidence. Changes to the RPIX in 2003 have comeback to haunt the dastardly trio. Now with a falling RPI at zero and CPI unexpectedly rising, their case is now naked without benefit of the home insurance that used to be included in the results.

    The case has started, but during the preamble the defence team try to get away with a 40 year term. The jury rejects this first offering and we await the coming days with a mixture of fear and loathing....

    Will it be RIP for Gordo or will he escape to join the Sachs of Goldman following his past mentor to do less taxing work as an exile.

  • Comment number 64.


    Was it not you who was telling us a few days ago that one of the side effects of QE would be the driving down of value of government bonds and that this was intended. Well if you will forgive me saying so, you don't get more driven down than not being able to sell them at all. It all sounds a bit like a triumph to me. So what am I missing here (Seriously)?

  • Comment number 65.

    Now listen, Mervyn.
    I'll tell you how to get out of this mess, but don't tell anyone else.
    Don't bother printing pounds or gilts, PRINT US DOLLARS.
    They'll never know.
    It's the sort of thing they use to do in the war.

  • Comment number 66.

    I agree with Friendlycard and stallinic #50 #47.

    Likely to be just the thin edge of the wedge I am afraid, the first misfire in the engine.

  • Comment number 67.


    Yup. The revenue are not making things any easier. I received a threatening letter today from a debt agency charging us £ 250 for company accounts that were 2 days late!

    Should have called ourselves a banking service, that way we could be collecting government money instead of paying for it.

    This quarter has been diabolical, for our company and more worryingly for all around us.Surely the real picture cannot be the one being painted by the BBC.

    Robert, if you are listening, this is business news. We are sinking, fast.

  • Comment number 68.

    Interesting, but is the auction failure perhaps just a not particularly consequential unintended consequence of the BoE's QE strategy? If I was a pension fund I'd normally be quite happy to buy 40 year gilts (matching my liabilities), but, given all the uncertainty, I might decide to wait for an auction of shorter-dated, because at least I'd know I could offload them to the BoE over the next few months, or to others who would normally hold them but have sold out to the BoE. In other words, perhaps the long-dated gilt market doesn't look that liquid going forward, compared to that for shorter-dated gilts.

  • Comment number 69.


    Early this week the Abu Dhabi wealth fund took a 10 pct stake in Daimler, the German car maker. This was a U turn as the sovereign wealth funds in the Gulf had previously turned their backs on Europe looking instead to the Pacific rim nations to invest in. Is this not a further indication that foreign investors do exist, are willing to invest but will not touch the UK with a barge pole?

    In the week before the G20 jamboree, it is not exactly a ringing endorsement for the UK's situation and future prospects is it?

  • Comment number 70.

    This is a disaster. Gordon Brown must acknowledge this by resigning and calling an election.


    Yes because starting from scratch again with another bunch who have no experience running anything bigger than a university special interest club is going to make everything better isnt it?


    What we need to do is stop looking for scapegoats and bring in the people who have run successful multi-nationals to look at the books and give us advice. Maye when we stop limiting our choice of politicians to the tiny group of elected MPs, many of whom are history graduates and loudmouth local issuists then we might have a properly run country.

    The likes of Bill Gates would have never been elected as an MP because they dont tick the right boxes, yet it is those type of people who should be running our country.

  • Comment number 71.

    This is Daniel Hannan video is brillant - well said and a must see!

  • Comment number 72.

    "It's a disaster", "edge of the abyss", "give [Gordon Brown] a good kicking". Yes, it looks like you've whipped up the semi-literate masses - who have suddenly become armchair economists, following the fine tradition of previously being Buy-To-Let 'investors' and Mirror-reading daytraders. In reality a rather riskyv product sold fairly well at a time of economic uncertainty. And the news is where?
    A little knowledge is a dangerous thing. No doubt we are in an economic rough period, but the same people who over-inflated the bubble and who over-cooked the housing market are now on this very blog, posting equally unfounded rumour and speculation.
    Wherever the semi-knowledgable turn their interest, whatver the middle classes chatter over as they drink their Peroni/Rose/Becks/Ale, whatever the latest subject of a BBC daytime TV programme/beginner's-guide turns to ****. If people exercised restraint in proportion to their lack of knowledge these wild swings wouldn't happen. But everyone has to be "on the inside" don't they?

  • Comment number 73.

    To all you moneyheads,

    This isn't about finance or even economics, it's about politics and the survival of the status quo. This government realises that if 'the markets' are allowed to readjust with no intervention it will by short, sharp and very messy.

    In the 1920's and 30's this country came quite close to anarchy and given the severity of the mess we're in now it is more likely to happen his time. Already you have the Met saying that they might not be able to cope with the demo's on 1st April and this is with the cushioning of reality that the government has managed so far.

    If you think this is far fetched or melodramatic read how more of the commentators on this blog are passing from despair to anger.

    I think that if you look at the record Nu-labour show a massive fear of public disorder and the current financial measures are part of the gameplan to let people adjust to the new reality more slowly as then the anger will be spread over a longer time period and therefor smoulder rather than be released in one explosive burst. For the consiracy theorists this also allows them to prepare even more draconion public order measures.

  • Comment number 74.

    Re: the You Tube video, I might have more time for the opinions of Darryl Hannah if he wasn't one of those insufferable right-wing tories who professes to despise the EU and all it stands for, yet is perfectly happy to dip his nose in the same trough as all the other freeloaders in Brussels/Strasbourg.

    Re: Grimupnorth and GluminLeics..I have every sympathy for both of you, but what line of business are you in?

  • Comment number 75.

    So many of the people posting here have an agenda and keep harping on about their pet theories I've had to register to say something about it.

    Times were a bit tough in retail in the last quarter of last year, extending to the first 6 weeks of this year - maybe 15% down on the previous year. But the last 6 weeks have been consistently very much higher (as much as 40%). This won't reflect down into manufacturing for a long while as stocks have to be run down, but it's heading in the right direction now.

    If I was to speculate why it would be as a result of a few things, but mainly the interest rate cuts. Among my colleagues we've all benefited to the tune of 75% reductions in paments, which has meant as much as an extra £1000 in our pockets. Fuel costs will be heading down rapidly in the near future too, so those who remain in work are going to be absolutely loaded very soon, the result of which will possibly be inflation, not deflation.

    Regarding the comments about the VAT rate cut, people are so incredibly stupid about it, it beggars belief. Of course consumers are barely affected as discounts of 2.5% are neither here nor there in the grand scheme of things (gratefully received nevertheless), but when it came to paying our VAT at the end of February the payment was vastly reduced for business. The reduction was £1000 for every £7000 it would have been - 14% reduction in the bill, not just 2.5%. This was an enormous boon to business, in spite of reduced turnover. Enormous.

    Finally, on the subject of Mervyn King's comments, two situations are being conflated to serve the person on the whiners here. Last year the fiscal boost was needed and King said so. This year, with the fiscal changes already in place, he's quite simply making the point that further fiscal changes wouldn't be so effective, given what has already been done. This is no conflict whatsoever with Brown's actions. He's done a certain amount but isn't intending to do so much more, except in targetted areas. This makes sense.

    As far as Daniel Hannan is concerned, I'd expect no more from an opportunist like him. I found his self-indulgent grizzling quite risible, but I understand completely why the hand-wringers here think he is some kind of champion for them. He came across to me as a bit of a prat, I'm sorry to say.

  • Comment number 76.

    I think its safe to conclude Brown/Darling havent a clue and more so are just now playing politics working on the basis after 4 hards years of a Tory government the Electorate will be begging for Labour.
    Sorry fellas no one will want Labour for 30 years having decimated the economy the way they have.
    There disaster will cost not just our kids but our grand kids unnecessary taxes and penury.
    Isn't it time Brown should some courage and called an election so the country was seen for once to be the first priority not his and is party's skin?

  • Comment number 77.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 78.

    I see the Irish managed to sell 1bn euros of gilts without any problem recently..................

  • Comment number 79.

    #69 "Early this week the Abu Dhabi wealth fund took a 10 pct stake in Daimler, the German car maker. This was a U turn as the sovereign wealth funds in the Gulf had previously turned their backs on Europe looking instead to the Pacific rim nations to invest in. Is this not a further indication that foreign investors do exist, are willing to invest but will not touch the UK with a barge pole?"

    Considering that Mercedeses and, especially armoured Mercedeses, are very popular in the Middle East, is there any doubt that this is a wise investment in the company that makes them ??

    All Crash Gordon makes are rude noises !! Would you invest in rude noises ??

  • Comment number 80.

    RP: "It would probably be silly to argue that Mervyn King is to blame for the flop of the gilts auction."

    It would indeed be incredibly silly. There is this very worrying tendency in the UK to blame those who raise the alarm instead of those who cause the trouble. It might be one of the things to consider to change in the future, if there is to be one.

  • Comment number 81.

    Looks like the US auction of Treasury Bills was pretty poor as well.

  • Comment number 82.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 83.

    My mistake - it wasn't US T-Bills on auction today. It was 5 yr notes.

  • Comment number 84.

    40 year Gilts !! 40 years in the wilderness !! Is this coincidence ?? Is the bond market saying that they do not want to spend 40 years in the wilderness by holding these Gilts ??

    BTW, I think the message here is that the BoE has scrape the very bottom of the barrel to buy this bunch of Gilts and the cupboard is now bare !! All future Gilts will be at the whim and fancy of the International Bond Markets and they are already battered by the Obama Administration's $1 trillion T-bills on one side and the Chinese sucking up all liquidity in the market like a super vacuum cleaner on the other side as they dump T-bills from their reserves.

    This puts a lie to Brown's claims to leadership in his "borrow and spend" policies to save the world !!

    As for Mervyn King, this brings to mind an old Cold War tale of an East Berlin optician who, on the night he went over The Wall, left a notice in his shop window. It read " Those who are long sighted, please go to my colleague, Herr Dr...... ! Those who are far sighted, please follow me over The Wall !!"

    And not to put too fine a point on it, All that is Gilt is not Gold !!

  • Comment number 85.

    Please someone, tell me that this is the end for Crash because I can't take anymore!

  • Comment number 86.

    #70 "The likes of Bill Gates would have never been elected as an MP because they dont tick the right boxes, yet it is those type of people who should be running our country."

    FYI, not so young Billy Gates never really ran his company either. He was too busy with the techie side and got other people to run the business for him. His genius is in getting the right people to run it and let him get on with doing what he does best !!

    On the other hand, Branson (that's Sir Richard to you) went from Zero to Hero and now heads an international empire that keeps getting into more and more interesting businesses that keep making money. He might be suitable for what you have in mind !! And, if he buys up Gatwick, we may yet see a London SpacePort when Virgin Galactic flies off from there !!

  • Comment number 87.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 88.

    "...but received acceptable bids for only..."

    So they will have to pay more interest!!!!

    Now it begins.

  • Comment number 89.

    hackerjack, if Brown would call an election at least it would be a start. The alternative could never be worse than the situation we are in now!

    As for politicians, I suggest we downsize the lot of them - reduce their numbers, salaries, allowances and broadcast airtime. Not sure about the likes of Bill Gates running the country, though. We shouldn't replace this sociopathic political class with a technocratic one.

  • Comment number 90.

    Business climate?

    I notice many posts on this blog refering to business "falling off a cliff". It's true.

    I've been in business for nearly 40 years and have seen previous recessions (and been bankrupted twice) but I've never encountered before such a complete business and political vacuum.

    Forget new leads, prospects or inquiries. There's nothing. Nobody wants to spend a cent more than they have to. The experience of myself and most of those I know in business is just day-by-day survival. It has become a desert. When people have nothing to lose they will become surprisingly unpleasant.

    And when I listen to the news and hear daily the lies and half truths being uttered by the corrupt gang of incompetent spivs running things - and observe in increasing close-up the ghastly black hole we're careering into - I find a growing resolve to act violently.

  • Comment number 91.

    Dirty_idea - you are in denial. This is a bigger disaster than The Towering Inferno seen from the bridge of the Titanic, lol!

  • Comment number 92.

    #69 "Early this week the Abu Dhabi wealth fund took a 10 pct stake in Daimler, the German car maker"

    The sad thing is, that there isn't a British car maker they could take a stake in, even if they wanted to.

    And therein lies the rub, even for those like me who are in favour af a targeted fiscal stimulus. Britain is dependent upon imports, for natural resources, food and manufactured goods. North sea oil could have been invested to try to make us competitive, but it was squandered. Then "financial services" paid the bills for a while, meaning the city looted the rest of the world, and took out a huge credit card bill on our behalf, pumping up the asset bubble.

    Anyone who has made money via property in the last few years is living on foreign credit taken out by other people. Well, that party is over for good. Shame we didn't invest in our ability to support ourselves instead. This is what we must do now, but it will be much more difficult.

  • Comment number 93.

    #73 talkinghorse

    "More draconian public order measures".

    What you mean like the revisions to the anti-terrorist legislation?

    Do you perhaps get a funny feeling that those protesting at the G20, or at other times and places in the near future, might just get themselves labelled as terrorists, or, at least, as just as bad as terrorists.

    Perhaps we'll see some sort of establishment "over-reaction", such as Tiananmen Square. Oh no, something like that couldn't possibly happen in good ol' blighty!

    No, of course it couldn't - that is, until it does happen.

    In current times, would those involved in the riots in the 1980's in Toxteth and Brixton or other historic public disorder, find themselves being dealt with under anti-terrorist legislation, perhaps?

  • Comment number 94.

    given the ineptitude of GB and captain Darling, it seems self-evident that we are heading towards IMF bailouts, it's merely a matter of time as all they seem to be capable of thinking is "borrow more". i'm worried about the inevitable conditionality that will come with those bailouts. anyone for a health system owned and run by one of America's 'healthcare' providers? new labour has sold the family silver and remortgaged the estate. shame on you Gordon.

  • Comment number 95.




  • Comment number 96.


  • Comment number 97.

    #74 - I doubt you'll get to read this due to moderation delays but my company is a mixture of manufacturing and engineering services. There is no problem with the Engineering services side of business for now but the manufacturing side which relies much more on the UK market has been dead since October last year with a brief flurry in January to mid March. This is not due to us being uncompetitive with cheap foreign imports but simply because companies seem unwilling to sign PO's that commit expenditure - we have more quotes out (all for work that is required) than ever in the history of the company - although this is really caused now by none of them becoming quotes - but we are not losing these quotes - the work is just not happening.

    Still enough about Business...............

    Banking, gilts, shares, bankers blah,blah,blah

    The problem as I perceive it is that RP is based in London, so is the BBC, the government and the Financial industry - therefore when the BBC talk business this means shares or banks or government - inevitable really - they will discover too late that they all need something else to feed them.

    If I walk across a supermarket car park is it good for this country or bad if I drop litter all over the place and the supermarket needs to employ someone to pick up all the litter? Is a job created or is the country's wealth wasted?

    One thing I do know is that things are just as bad if not worse in USA and the rest of Europe is bleak too. South East Asia is struggling, China is struggling (but in a slightly different way), even Middle East is starting to feel it. We have reached a global crisis which requires some very detailed intelligent joined up thinking but almost certainly with a new perspective. Unfortunately the people in power seem to be trying to solve new problems (eg worldwide overpopulation v available resources, standard of living equalisation brought about by a global economy) with old methods.

    Ultimately money will not save the population of the world - in the developed world we need to accept that our standard of living OR populations must fall because there are not enough resources to go round.

    The option is to keep improving health and longevity and wait for the Four Horsemen of the Apocalypse to come and do the job for us.

    Sweet Dreams.

  • Comment number 98.


    I am of course with you. But you have to realise that you are up against the system. The system has developed over many years. It enables non productive no hopers to exist.

    The system relies on the goodwill of many people that work.
    In exchange we have to put up with the hangers on that leech off us all.
    But we don't have abject poverty.

    Arguably the system is broken. Hangers on are taking way too much.

    How to change the system though?
    We might need to since it is faltering.
    What will we be left with?
    How will the non productive survive?

    What to do with the millions and millions of non productive people?
    Pol Pots answer is not tenable by the way.

    So we have to put up with the bankers etc.
    I just wish that they would not interfere with the productive workers.
    They are biting the hand that feeds them..

  • Comment number 99.

    lb0610h, Good to hear from you! I didn't realise New Labour had any supporters/activists left working in business. I thought they could only be found in the management lite layer of the bloated public sector.

  • Comment number 100.




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