March 25 (Bloomberg) — The U.K. failed to find enough buyers for 1.75 billion pounds ($2.55 billion) of bonds for the first time in almost seven years as debt investors repudiated Prime Minister Gordon Brown’s plan to stem the worst economic crisis in three decades.
Gilts slumped after the London-based Debt Management Office, which manages bond auctions on behalf of the Treasury, said investors bid for 1.63 billion pounds of the 40-year securities. The last time the U.K. government was unable to attract enough investors was in 2002 when it tried to sell 30- year inflation-protected bonds.
An explanation for non-economics types.
Long term interest rates are set by the markets. It is only the short term base rate which is set by the government.
We might indeed want to have low interest rates at the moment in order to get out of this recession/depression thing.
We might also want to borrow lots of money to pay for all of these lovely spending plans and bailouts.
However, we might find that the two aims are in conflict. If we borrow lots and lots of money then interest rates will rise.
The worrying thing is, this might be the first sign of exactly that happening.
I don´t say that it is mind, a single auction doesn´t tell us much. But if this continues, interest rates will indeed rise and no, we won´t like that at all just at the moment.