Sales of gilts soar thanks to Britain's status as a safe haven
Thursday 05 January 2012
Britain's safe-haven status triggered the sharpest spike in gilt purchases by foreign buyers since the Lehman Brothers collapse, Bank of England figures showed.
Net purchases by foreigners increased by £16.3bn in November, compared with £12.5bn the previous month.
Gilts were the best-performing government bond in the world last year, with their value gaining 17 per cent. Yields – in effect the interest rate Britain pays to borrow on the financial markets – correspondingly fell massively during the period as demand was so high. At one stage gilt yields were lower than those of German government bonds, traditionally Europe's safest harbour in financial storms.
The low yield and high price of gilts is attributed by analysts to the Government's tough austerity plans and the associated economic slowdown which makes it highly unlikely that the Bank will raise interest rates in the foreseeable future.
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