The interest rate on UK government debt fell to near-record lows as investors flocked to gilts as a safe haven from the eurozone chaos. Yields on 10-year government debt fell to 1.932 per cent last night.
Investors have increasingly been attracted to the UK due to its status as a non-eurozone state and the strength of its triple-A credit rating.
Sam Hill, a strategist at RBC, said: "It is understandable that there is demand for assets which aren't denominated in euros."
Chancellor George Osborne has long-trumpeted the low cost of borrowing as a testament to his austerity regime. While this is a contributing factor, investors also recognise that the economic crisis is likely to leave Bank of England rates low for a long time, and the low bond yield reflects that. Gilt yields are still slightly higher than those of German bonds, which also fell yesterday, to 1.541 per cent. Germany has also been sought out by investors for its safe haven status.