U.K. Bond Auction Fails for First Time Since 2002

Source: Bloomberg

March 25 (Bloomberg) -- The U.K. failed to find enough buyers for 1.75 billion pounds ($2.55 billion) of bonds for the first time in almost seven years as debt investors repudiated Prime Minister Gordon Brown’s plan to stem the worst economic crisis in three decades.

Gilts slumped after the London-based Debt Management Office, which manages bond auctions on behalf of the Treasury, said investors bid for 1.63 billion pounds of the 40-year securities. The last time the U.K. government was unable to attract enough investors was in 2002 when it tried to sell 30- year inflation-protected bonds.

Brown’s government plans to sell a record 146.4 billion pounds of debt this fiscal year and as much as 147.9 billion pounds in 2010 as he tries to pull Europe’s second-largest economy out of its worst recession since 1980. Brown’s plan drew criticism yesterday when Bank of England Governor Mervyn King told lawmakers in Parliament in London the government should be “cautious” about spending and deficits.

“This is a warning signal investors are sending to the government,” said Neil Mackinnon, chief economist at hedge fund ECU Group Plc in London, who helps manage about $1 billion in assets and is a former U.K. Treasury official. “Investors are giving the thumbs down to the gilt market.”

Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aQGG.mWeZ4eU&refer=worldwide

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Coming soon to a country near you, the inability to fund daily operations!! Yay!

http://www.bloomberg.com/apps/news?pid=20601009&sid=atGfIzlH6vDE&refer=bond

By Dakin Campbell

"March 25 (Bloomberg) -- Treasuries fell for a fifth day after an auction of $34 billion in five-year notes drew a higher-than-forecast yield, spurring concern record sales of U.S. debt are overwhelming demand.

The security drew a yield of 1.849 percent, higher than the 1.801 percent forecast in a Bloomberg News survey of eight trading firms. The U.K. failed to attract enough bidders today at an auction of 1.75 billion pounds ($2.55 billion) of gilts for the first time in almost seven years.

“This caught a lot of people unaware,” said Bulent Baygun, head of interest-rate strategy in New York at BNP Paribas Securities Corp., one of the 16 primary dealers that are required to bid at Treasury auctions. “Prior to the auction the Fed conducted its purchases of Treasuries, which may have compressed interest rates below where they would have been otherwise.”



Fed Buys $7.5 Billion of Debt to Cut Borrowing Costs

http://www.bloomberg.com/apps/news?pid=20601009&sid=a___9sY50Kis&refer=bond

"March 25 (Bloomberg) -- The Federal Reserve bought $7.5 billion of Treasuries in the first outright purchase of U.S. government debt by the central bank to keep consumer borrowing costs low since the 1960s.

Thirteen of the 19 securities maturing from February 2016 to February 2019 listed for possible acquisition were bought, the Federal Reserve Bank of New York said in a statement today. It is the first step in a six-month program to buy up to $300 billion in Treasuries.

The Fed joins central banks in the U.K. and Japan in extraordinary purchases of government debt, broadening efforts to unfreeze credit and end the recession after cutting the benchmark interest rate close to zero. Policy makers announced the decision to buy the debt last week along with a plan to more than double purchases of housing debt to $1.45 trillion, hoping to reduce rates on home loans..."