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Our views 27 June 2019

Why no really long gilts?

By Jonathan Platt, Head of Fixed Income

5 min read

With Austria set to launch a new 100 year bond, why hasn’t the UK done this already?

No UK government or agency, in our long history of government debt finance, has been given the chance to raise long-term debt at such low rates. These opportunities do not come around often and this one is very stark. Put bluntly, if the UK government cannot earn a better return than 1.5% on its spending over the longer term, it is not doing its job. Just think of the great infrastructure projects, health investment, educational advancements that could be supported – to say nothing about starting to address unfunded public sector pensions.

The Debt Management Office is an executive agency of HM Treasury. Part of its remit is the obligation to minimise financing cost (for the UK taxpayer) over the long term, taking account of risk.

The present timidity on raising long-term finance shows just how much we have lost the sense of “seizing the moment” to make transformational change.

Past performance is not a reliable indicator of future results. The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.