The Plowman is confused
The UK government is shifting to shorter-term borrowing to lower its interest bill as a global debt sell-off adds to the pressure on its tax and spending plans.
Jessica Pulay, head of the UK’s Debt Management Office, said the agency was softening a reliance on long-term borrowing that has made the country an outlier among major global bond markets, amid falling demand from institutional investors.
The 10 year bond has not done well against G7 peers
The 30 year UK gilt is yielding more than any of its equivalents in the G7
Shorter-term debt is currently cheaper to take out — an important consideration for a country whose issuance costs have surged this year and whose Labour government is struggling to remain within its tight fiscal rules.
Impact on pensions and annuities.
The current 30 year gilt yield is at a high for the century.
Last week the 30-year gilt yield climbed to 5.48 per cent, also pushed up by global markets unsettled by worries about Donald Trump’s tax-cutting budget bill. The long-term UK borrowing benchmark is up 0.37 percentage points this year and close to its highest level since 1998.
Now is a most unusual time for pensions, not because of the equity markets (which are back where they were at the beginning of the year) but because of the gilt markets both sides of the Atlantic.
I am not expert in these things but this blog has many readers who are. Can anyone send me their thoughts to henry@agewage.com or post them in comments. I know you but will respect anonymity if you want it!