We pointed out in October last year that there were jitters within Whitehall about the amount of debt which the government needs to raise through gilts issuance – and whether there would be enough buyers.
So far this hasn’t been much of a problem. In fact there has been a bubble in the gilt market – as investors flee towards safety – pushing yields to new lows, as John Redwood points out here.
That could be about to change.
Three months ago Robert Stheeman, chief executive of the Debt Management Office, reassured a committee of MPs that yields on gilts would not have to rise despite issuance in the coming year being double the previous annual record.
But my colleague David Oakley reports in today’s FT that the UK “has been forced to offer higher yields to meet auction targets”. So too has the Netherlands, while Spain and Belgium have had to cancel some offerings. Meanwhile a German sovereign bond auction yesterday failed with bids of only E5.24bn for E6bn of bonds.
Stheeman warned back in October that one “uncovered auction” in the UK would be tolerable. A series, however, would be distinctively troubling.