Investors pay to lend money to UK

by liamssoft | January 11, 2012 at 01:20 am

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The Government has sold bonds at a negative interest rate as investors effectively paid to lend money to the UK.

For only the second time ever, the Treasury sold government bonds — known as gilts — that will pay returns below the level of inflation.

The Debt Management Office yesterday sold £700 million of inflation-linked bonds that will mature in 2047 on Tuesday. Adjusted to exclude inflation, these 35-year gilts sold with a rate of -0.116pc, mean investors were accepting a small real-terms loss in exchange for lending their cash to the UK.

Very low yields on gilts are also bad news for people buying annuities to provide a pension income, as insurance companies base annuity rates on the returns they receive on gilts.

www.telegraph.co.uk