David Prosser: Britain's bonds are selling like hot cakes

Outlook So much for Britain's lack of creditworthiness. The Debt Management Office yesterday staged its first sale of gilts in 2010, auctioning £4bn of short-term government borrowing. With Pimco, the world's largest bond fund, this week warning that it plans to trim its exposure to the UK this year given its view that we are 80 per cent likely to see a credit rating downgrade, no doubt investors were few and far between? Well, no, actually. Total bids during the auction totalled £10bn.

It is early days, of course. This fundraising represented only a tiny fraction of what the UK must secure from gilts investors this year in order to make good the hole in the public finances. And genuine doubts persist over the extent to which the current government is capable of achieving the deficit reduction targets it has set – the Treasury Select Committee's criticism yesterday of Alistair Darling's failure to explain in the pre-Budget report how he will keep his borrowing promises is nothing other than the consensus view.

And yet for all the panic in the wake of the PBR over Britain's treasured AAA credit rating, Pimco is very much in the minority at putting the chances of a downgrade so high. There is a window of opportunity within which to address mounting borrowing and – whatever the Conservatives claim to the contrary – we start from a position of relative strength in that total borrowing as a proportion of GDP is not as high here as in many other Western countries.

There are plenty of other auctions to come, and no doubt concern will resurface. But if Alistair Darling – or George Osborne for that matter – is able to respond positively to the criticisms put by the TSC yesterday, a downgrade can be avoided.