Government fails to sell all bonds
Posted by Archana Venkatraman on March 26, 2009
For the first time in almost seven years, the UK Treasury failed to sell all of government bonds to bidders. The failed auction sparked new fears over the state of government borrowings.
In order to ease the pressure off public finances, the government intended to sell £1.75bn of 40-year securities. But investors bid only for £1.63bn of the bonds. The 7% under-subscription illustrates the difficulty faced by government to raise money amid deteriorating financial conditions and also the rising supply of government bonds.
The last time, the government failed to attract enough investors to sell its 30-year bonds was in 2002. Prior to that, the government failed in 1995 and 1998, since the launch of bond auctions in 1986.
However, analysts say that the failure is “one-off” incident and that the bidders for bonds still remain “strong”.
Separately, the Bank of England has launched a quantitative easing programme and inject a total of £75bn of new money and get the economy going. The UK economy shrank 1.5% in the fourth quartet, its highest since 1980.
