Not really and not quite

Second, it does that because people want bonds: in effect the government is running a savings account service by issuing them to people who want maximum security for their money, whatever the interest rate, and the government is happy to do that to support the economy.

Whatever the interest rate, eh?

And one of the buyers of second hand bonds is the Bank of England, which has bought £635 billion of government bonds since 2009.

If the government, the Treasury of the Bank of England believed that it’s all independent of the interest rate then why do they own such a large proportion of them?

The underlying point here being that you can’t look to the current market price of bonds to tell you anything useful when it’s clearly and obviously such a rigged market in bonds. Just to clarify here, perfectly happy with the rigging. Just insisting that the price isn’t telling us what some thing given the rigging.

3 thoughts on “Not really and not quite”

  1. The Meissen Bison

    whatever the interest rate

    How to explain the discrepancy between the rates on Italian and German Euro bonds?

  2. People do NOT want bonds. The vast majority of Gilts (UK government bonds to ex-colonials) are purchased by Insurance Companies because the FSA, then FCA, now PRA, require them to do so. If they were allowed to buy something that gave them a positive real return on their investment, they would do so.
    Murphy is old enough to remember Margaret Thatcher buying a loft-full of baked beans because that gave a better return on investment that gilt-edged under Wilson/Healey and Callaghan/Healey [Denis Thatcher, having suffered the appalling food served at Public School, presumably put up with having to eat his way through one-quarter of an attic-full of baked beans despite being a millionnaire able to afford decent food]

  3. @john77

    appalling food served at Public School

    No, we had Kelloggs Cornflakes, Milk, OJ and toast for breakfast and Kelloggs Rice Crispies on Sundays

    Before bed, more milk and prefects also had an HP sauce sandwich

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