Gilt auction failure.

purch

but what about the inflation risk? surely that would affect the investment?

Of course you need to factor that into any Investment decision.

You could always Invest it in Equity's and receive no return at all :eek:

dealsearcher

Having read through the thread there are some very useful points.

I was struck by the accusation in the news that Mervyn King was out of line to criticise the government, even obliquely, by stating that a further fiscal stimulus is not a good idea. If he had said nothing the government would say that he agreed with them. If he says something it is said that it is not his place to do so.

If it is not the place of the governor of the bank of england to voice concerns who can?

CLAPTON

One could of course take the view that the Governer stated the blinding obvious.
Only here it seems that the blinding obvious is considered worthy of 24 hour wall to wall news coverage (slow news day).
Tomorrow (or a day or two) it will of course be forgotten and rightly so.

*MF*

Meanwhile, over the pond ... things don't look that much better.

In an early sign that Washington may have to pay more to finance huge stimulus plans to fix the economy, investors hesitated at buying a government debt issue on Wednesday, forcing the Treasury to pay a higher interest rate than expected.

While the government ended up paying only a fraction of a percentage point more to sell the notes, the tepid response set off a sudden decline in stock prices, though they recovered in the last hour of trading. The news also led some experts to wonder whether investors’ appetite for Treasuries — considered safe investments — is beginning to wane.

Full story here:

http://www.nytimes.com/2009/03/26/business/26markets.html?_r=1&ref=business

Reaper

I've said this before and I'll say it again. Everybody who has been buying gilts recently has been nuts (ok, I'll exclude ones close to maturity if you insist).

At a time when everybody believes inflation is looming who would want a fix rate return, and who would pay a lot for it making the yield extremely small?

Until now the answer has been everyone. The only reasons I can think of are:
1) Fear of the markets causing a flight to a safe haven.
2) In the very short term they were expected to rise because of no 1 above, plus falling interest rates, plus the expectation of QE buying pushing prices up.

Those are all very short term views. It is now slowly starting to dawn on the idiots who bought that the short term spike is over and nobody wants to take them off their hands.

Expect gilt prices to plummet. Soon the government will be the only buyer of its own debt. It's a crazy world we live in.

Rochdale_Pioneers

A gilt sale failing to sell a small proportion of whats on offer. OK so that puts us in line with Germany, who had a similar result in early January, and still better than Spain who had to cancel a sale completely due to lack of demand.

Its a warning shot from the market alright, but its not as if they're only firing in our direction.

Am I right in thinking that these were the first gilts being sold with such a long period (40 years) attached to them?

Generali

Rochdale_Pioneers wrote: »

Am I right in thinking that these were the first gilts being sold with such a long period (40 years) attached to them?

Some (all?) War Bonds were undated so these aren't the longest ever sold. I can't recall Gilts with maturities of 40 years being sold in the UK before but I'm not an expert.

purch

Am I right in thinking that these were the first gilts being sold with such a long period (40 years) attached to them?

No

The first conventional 50 year Gilt was issued on 4th April 2006 at 4 1/4 %

There were a couple of Index Linked Gilts of that duration issued in 2005

Since then there have been quite a few 40 and 50 year duration issues.

ricll

isn't it a good time to invest in corporate bonds? That's what H-L are saying anyway. I'm opening an account with them and will be investing some £.

Generali

ricll wrote: »

isn't it a good time to invest in corporate bonds?

I don't think so personally. Some income shares are looking like stunning value - some utilities for example.