At some point the government may not be able to raise any more money in the gilt markets.
That’s my interpretation of comments made yesterday at a Treasury sub-committee by Robert Stheeman, chief executive of the Debt Management Office.
(No, there weren’t many other journalists there.)
Bear in mind that gilt issuance will be £110bn this year, up from £58.5bn last year and a previous record of £62.5bn. (The new big figure includes the £37bn of capital which the state is injecting into RBS, HBOS and Lloyds TSB.)
Stheeman told the meeting that there hadn’t been an uncovered auction – ie one in which some gilts didn’t sell – since 2002.
Now he’s bracing himself for this to happen. Or even a “series of uncovered auctions”.
“We are not so sanguine if there was a series of uncovered auctions…a series I would not feel comfortable with,” he said.
That is civil service-speak. It means: There will be a glut of government paper. At some point investors’ appetite could run out. We just don’t know when.
If so, this could have ramifications for the £250bn of government-guaranteed bank debt which will hit the market as the result of last week’s bailout.