"The UK and Italy struggled to sell bonds on Thursday in a fresh sign of the difficulties governments are facing because of the debt needed for economic stimulus packages and bank recapitalisations.Not good is it, I wonder if Gordon Brown will react by having the markets arrested...
The two bond auctions saw both governments forced to pay higher yields to attract investors and Italy scaled back the amount on offer.
Analysts say it is an “ominous” warning that debt raising is likely to become even tougher in the coming months if problems are emerging so soon after government announcements to increase issuance. A record of more than €1,000bn ($1,290bn) of debt is expected to be issued in Europe next year.
Significantly, the bond auctions were for shorter-dated securities, usually the most sought after.
Roger Brown, global head of rates research at UBS, said: “The UK auction was dire. I do not remember one as bad for shorter-dated bonds. It is an ominous sign of trouble ahead.
“It is surprising to us that the UK Treasury should encounter such weak demand for a four-year gilt in only the second auction since Monday’s pre-Budget report, when record levels of issuance were announced.”
with economies contracting, lower tax receipts and rising benefit payments mean countries could face higher debt servicing costs as overall debt levels rise.
Among European countries, the UK and Italy may face the greatest difficulties because of their large debt programmes. The UK announced plans to raise an extra £37.4bn ($56.5bn) in gilts this year in the PBR.
This takes the overall total to £146.4bn – an all-time high and nearly three times the amount raised in 2007-08. The Debt Management Office forecasts bond issuance remaining high, at an average of £135bn a year, until 2013."
Friday, 28 November 2008
Would you buy a bond from Gordon Brown
The markets it seems are not: