So, Ritchie’s misunderstandings about market, par, nominal, values of gilts come from this bloke:
Gap between nominal vs market value is a phenomenon of past decade and low interest rates, historically abnormal (see graph w/data from BIS) pic.twitter.com/uXNeYJOf5B
— Daniel Mügge (@dmugge) September 17, 2017
If you look at his source it’s Bank for International Settlements (aka, central bankers’ central bank). Which discusses this particular database here.
Measuring valuation effects
Uniquely, the new BIS data set tracks the evolution of government core debt at nominal and market value.
Market value is the amount for which a creditor could exchange assets or settle a liability at any moment in time. In particular, changes in the market value of debt affect the financial position of investors that mark their portfolios to market or monitor market values in order to assess potential gains or losses. Market values may fluctuate significantly because of changes in risk-free interest rates, but also in credit and other risk premia.
In contrast, the nominal value of a debt instrument, ie “the amount that at any moment in time the debtor owes to the creditor” (Handbook on Securities Statistics; see BIS-ECB-IMF (2015)), is stable from the moment of issuance till full repayment (except when accrued interest has not yet been paid; see below). The difference between the market and nominal value of a security reflects changes in yields since issuance.
There simply is no mystery at all and it’s explained at the original source.
It’s also sod all to do with uncertainty or even risk. It’s falling interest rates and that’s all.