No, not really

UK gilt yields have doubled since the vote, forcing the Treasury to pay more to finance its debts.

The Observer doesn’t quite get this, does it?

Rising yields means that new debt issued will carry a higher coupon. Makes absolutely no difference whatsoever to debt already issued.

7 thoughts on “No, not really”

  1. Except the State never retires debt, it simply rolls it over.

    So the yield on new debt will also be the yield on all rolled-over debt, is that not right?

  2. Indeed. And the BoE is buying more debt this year than will be issued. So the interest goes back to the Treasury anyway.

  3. It’s like those complaining inflation has doubled … to comfortably less than the BoE target rate. The same people were worrying about deflation previously but don’t let consistency get in the way of a Remoan.

    Gilt rates are still abnormally and uneconomically low: get over it, Observer!

  4. “UK gilt yields have doubled since the vote, forcing the Treasury to pay more to finance its debts.”

    This may not b true at all. While it is clear that the Treasury will pay a higher coupon on the debt they issue this week than they would have paid on the same debt if they had issued it a few weeks ago, it is not clear on the face of it (and I am not going to look up the details) that the the coupon on the debt they issue this week will be higher than the debt that is maturing this week.

  5. Does it not make the extant gilts worth less to the holder? Nobody will buy that holder’s gilts at par, they will want a discount.

    How long are gilts actually held? Are they frequently traded or do they sit there? Anyone know?

  6. Um, it’s still issuing debt, right?

    If not, rising yields would be great news since the sovereign could buy back its own debt at a lower price.

    So rising yields still bad for the debtor.

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