IMF urges more transparency at UAE state firms
Friday, 16 March 2012
LONDON, Mar 15 (AFP): Britain will next week unveil plans for issuing state-bonds lasting 100 years, a Treasury source said Wednesday, as the government looks at locking in low interest rates.
Britain's finance minister George Osborne will use his annual budget statement on March 21 to launch a consultation on century-long government bonds, or gilts, the source told AFP.
Chancellor of the Exchequer Osborne may also unveil plans for perpetual government bond loans for the first time in almost 100 years, the source added.
Britain last issued perpetual bonds, on which the capital is never repaid but interest is charged forever, following the end of the First World War in 1918.
"The chancellor is expected to announce" its plans for gilts in the budget statement next Wednesday, the source told AFP. Currently, Britain's gilt with the longest maturity is 50 years.
The coalition government is looking at doubling the term to take advantage of historically-low yields on British gilts. It wants to borrow money cheaply from institutional investors that it can pay back over an extended period.
"This is about locking in for the future the tangible benefits of the safe haven status we have today," the source said.
"The prize is lower debt interest payments for taxpayers for decades to come. It is a chance for our great grandchildren to pay less than they otherwise could have expected to thanks to this government's fiscal credibility."
Demand for current British gilts was being driven by the Bank of England's asset purchase programme, known as quantitative easing, and which is aimed at boosting economic growth in Britain.
"The Bank of England is the fastest growing purchaser of gilts and with no sign of the BoE shrinking its balance sheet any time soon, there is a sound logic to Osborne striking while the iron is hot," said Kathleen Brooks, research director at trading site Forex.com.
The move comes as ratings agency Fitch announced on Wednesday it had lowered Britain's long-term outlook to negative from stable, while confirming its top-level AAA rating, threatening higher future borrowing costs.
The ratings agency said the revision "reflects the very limited fiscal space to absorb further adverse economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery".
The central bank last week maintained the level of its asset purchasing scheme aimed at boosting lending among commercial banks-at £325 billion (388 billion euros, $514 billion).
Britain's finance minister George Osborne will use his annual budget statement on March 21 to launch a consultation on century-long government bonds, or gilts, the source told AFP.
Chancellor of the Exchequer Osborne may also unveil plans for perpetual government bond loans for the first time in almost 100 years, the source added.
Britain last issued perpetual bonds, on which the capital is never repaid but interest is charged forever, following the end of the First World War in 1918.
"The chancellor is expected to announce" its plans for gilts in the budget statement next Wednesday, the source told AFP. Currently, Britain's gilt with the longest maturity is 50 years.
The coalition government is looking at doubling the term to take advantage of historically-low yields on British gilts. It wants to borrow money cheaply from institutional investors that it can pay back over an extended period.
"This is about locking in for the future the tangible benefits of the safe haven status we have today," the source said.
"The prize is lower debt interest payments for taxpayers for decades to come. It is a chance for our great grandchildren to pay less than they otherwise could have expected to thanks to this government's fiscal credibility."
Demand for current British gilts was being driven by the Bank of England's asset purchase programme, known as quantitative easing, and which is aimed at boosting economic growth in Britain.
"The Bank of England is the fastest growing purchaser of gilts and with no sign of the BoE shrinking its balance sheet any time soon, there is a sound logic to Osborne striking while the iron is hot," said Kathleen Brooks, research director at trading site Forex.com.
The move comes as ratings agency Fitch announced on Wednesday it had lowered Britain's long-term outlook to negative from stable, while confirming its top-level AAA rating, threatening higher future borrowing costs.
The ratings agency said the revision "reflects the very limited fiscal space to absorb further adverse economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery".
The central bank last week maintained the level of its asset purchasing scheme aimed at boosting lending among commercial banks-at £325 billion (388 billion euros, $514 billion).