Originally posted by Wikinews. Wikinews content appears under the Creative Commons Attribution 2.5 license except where specified. As these articles are static snapshots of news items that may be later updated, they may not represent the latest or final revision of that article, and posted information may be only preliminary. UK sells £4 billion of government debt at highest yield since 2007 ------------------------------------------------------------------------------- July 9, 2023 Original URL: https://en.wikinews.org/wiki/UK_sells_%C2%A34_billion_of_government_debt_at_highest_yield_since_2007 The United Kingdom's Debt Management Office (DMO) auctioned off £4 billion in government debt as two-year gilts Wednesday with an average annual yield of 5.668%, the most lucrative since June 2007. In the UK, the DMO issues gilts, or bonds, as securities to finance spending when it exceeds the revenue generated from taxation. Despite high demand according to Reuters, with bids for the gilts totalling over £11 billion, returns attained a fifteen-year high because, Reuters reported, traders believed the Bank of England (Bo E) would continue raising interest rates, and because of high inflation devaluing returns. On June 22, the Bank's Monetary Policy Committee upped its bank rate in the thirteenth consecutive rise from 4.5% to 5% after "significant upside news in recent data that indicates more persistence in the inflation process". That day, HSBC asset strategist Joseph Little told Reuters the Bo E might increase its main interest rate to up to 6% because "[i]nflation pressures show more persistency and more momentum than other Western economies, and that forces the Bank into a hawkish corner". Reuters said Wednesday investors believed rates would climb to about 6.25% sometime December before falling. The effect of higher interest rates is such gilts with a maturity of October 2025 last month brought an average yield of 4.874% and 3.634% in January. However, Nat West bond specialists told Reuters last week the gilts were "one of the cheapest bonds on the UK fitted curve". UK headline consumer price index inflation held at 8.7% in May contrary to forecasts, while core inflation, which excludes certain consumables like food and energy, increased to 7.1% from 6.8% in April, a high not seen since 1992. The Bo E then projected by the end of 2023 inflation would come down to about 5%, not the original 4%. In June 2007, the UK offloaded five-year gilts worth £2.5 billion with an average yield of 5.790%. At 08:17 BST (0717 UTC) Thursday, the yield on two-year gilts was 5.429%, while the ten-year gilt at 08:19 was 4.548%. == Sister links == * == Sources == * https://www.marketwatch.com/investing/bond/tmbmkgb-10y?countryCode=BX * https://www.marketwatch.com/investing/bond/tmbmkgb-02y?countrycode=bx * https://www.cityam.com/yield-on-fresh-uk-government-debt-hits-highest-level-since-2007/ * https://www.proactiveinvestors.co.uk/companies/news/1019855/uk-gilt-sale-highlights-soaring-cost-of-government-debt-1019855.html * https://www.reuters.com/markets/rates-bonds/uk-sells-government-bond-with-highest-yield-since-1999-2023-07-05/ * https://www.dmo.gov.uk/media/sh2d1bbp/050723conventional.pdf * https://www.reuters.com/markets/rates-bonds/bank-england-hikes-rates-5-surprise-move-tackle-stubborn-inflation-2023-06-22/ * https://www.theguardian.com/business/2023/jun/21/uk-government-debt-above-100-per-cent-of-gdp-first-time-since-1961 * https://www.bbc.com/news/business-12196322 .