Investors pay to lend money to UK
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.