Britain becomes safe haven in eurozone debt crisis.

[puisseguin]

It seems that keeping a tighter grip on UK borrowing and tackling the budget deficit is paying dividends.

Whilst Italy's cost of borrowing and financing it's debts spirals out of control and has passed 7%, the cost of financing the UK's debt is falling.

It seems that investors are looking for less risky places to put their money than Italy, Greece, Spain, Portugal and France and are moving to buying UK bonds. It seems the more we are prepared tackle our debt crisis the less money we will need to finance it.

 

http://www.thisismoney.co.uk/money/markets/article-2060225/Cost-government-borrowing-falls-historic-lows-Britain-safe-haven-eurozone-debt-crisis.html?ito=feeds-newsxml

 

The UK is benefiting from its current status as a reliable base for investment as the cost of government borrowing falls to historic lows.

 

Ten-year gilt yields dropped to 2.106 per cent at one point yesterday – their lowest since they were introduced in the 1950s.

 

The UK Debt Management Office, which issues government gilts – or bonds – on behalf of the Treasury, said the UK was a safe haven for investment in the eurozone debt crisis while fears persist over Italy's failure to reduce its debt.

 

...........

 

Two days ago, yields on Italian ten year bonds crashed through the feared 7 per cent barrier.

 

David Miller, partner at Cheviot Asset Management, said: 'The gilt market has not been driven by valuations but by sentiment so the rise in purchases is a partial vote in favour of the UK.

 

'The market movements this week have shown Britain to be a beacon of sanity in Europe and I would expect to see this trend continue until unrest in Europe is soothed by action.'

[WeX]

I dread to think what the news headlines would have been if Labour had clung to power and kept borrowing money like there was no tomorrow. In fact that was probably their moto.

[puisseguin]

I dread to think what the news headlines would have been if Labour had clung to power and kept borrowing money like there was no tomorrow. In fact that was probably their moto.

 

I think this probably answers your question.

 

http://www.guardian.co.uk/business/2010/mar/29/uk-aaa-credit-rating-warning

 

Monday 29 March 2010 13.10 BST

 

Britain may lose its top notch credit rating unless the government formed after the election carries out drastic cuts to the country's deficit, Standard & Poor's warned.

 

"In the absence of a strong fiscal consolidation plan, the UK's net general government debt burden may approach a level incompatible with an 'AAA' rating," the credit ratings agency said in a statement.

 

S&P kept its negative outlook on the economy, but postponed a decision on a possible downgrade until after the election. Fitch, another rating agency, warned on a possible downgrade last week, saying that budget cuts announced by chancellor Alistair Darling last week were not big enough.

 

Credit agencies are expected to cut Britain's rating after the election unless decisive action is taken on the deficit.

[puisseguin]

Our base interest rate is still far too low for us to be called a good investment.

 

I think you are missing the point.

It is nothing to do with base interest rates. This is about selling debt. That is gilts being sold to cover a countries debts.

The UK's costs have fallen by a 1/3 in the last year to just over 2%, whilst Italy's have increased to 7% and rising. It is a reflection of the risk of not getting your money back.

Investors can get 7% on Italian bonds but run the risk of default. The demand to buy up "SAFE" Uk debt has driven down returns to around 2%. A good investment is one where you get your money back. Those who hold Greek dept are in danger of having to write off at least 50% of the money they loaned.

[L00b]

Our base interest rate is still far too low for us to be called a good investment.

Already posted in another EU crisis-related thread earlier today, but read this (the section headed "You expect me to default? No bonds, I expect you to die"), in support of puisseguin's explanation above.

 

Which should help you understand the lack of relationship/relevance of the BoE base interest rate

[vinyl]

Sorry yes, my brain died for a moment.

 

Final day of my home brew, been "sampling" it on each pass through the final stage

 

However, it would probably still be accurate to say we are not a "good" investment, rather a "safe" investment. If Italy doesn't default, then of course the 7% is a far better investment than 2%. It is really a risk/reward situation, rather than a good/bad situation.

 

I think you can do rather better than 7% if you wish to invest in Zimbabwe.

[puisseguin]

Sorry yes, my brain died for a moment.

 

Final day of my home brew, been "sampling" it on each pass through the final stage

 

.

 

Reginald Maudling's legacy to the country.

[oldprune]

It seems that keeping a tighter grip on UK borrowing and tackling the budget deficit is paying dividends.

Whilst Italy's cost of borrowing and financing it's debts spirals out of control and has passed 7%, the cost of financing the UK's debt is falling.

It seems that investors are looking for less risky places to put their money than Italy, Greece, Spain, Portugal and France and are moving to buying UK bonds. It seems the more we are prepared tackle our debt crisis the less money we will need to finance it.

 

http://www.thisismoney.co.uk/money/markets/article-2060225/Cost-government-borrowing-falls-historic-lows-Britain-safe-haven-eurozone-debt-crisis.html?ito=feeds-newsxml

 

The UK is benefiting from its current status as a reliable base for investment as the cost of government borrowing falls to historic lows.

 

Ten-year gilt yields dropped to 2.106 per cent at one point yesterday – their lowest since they were introduced in the 1950s.

 

The UK Debt Management Office, which issues government gilts – or bonds – on behalf of the Treasury, said the UK was a safe haven for investment in the eurozone debt crisis while fears persist over Italy's failure to reduce its debt.

 

...........

 

Two days ago, yields on Italian ten year bonds crashed through the feared 7 per cent barrier.

 

David Miller, partner at Cheviot Asset Management, said: 'The gilt market has not been driven by valuations but by sentiment so the rise in purchases is a partial vote in favour of the UK.

 

'The market movements this week have shown Britain to be a beacon of sanity in Europe and I would expect to see this trend continue until unrest in Europe is soothed by action.'

 

I suppose it is good that the spending cuts are reaping a dividend. The low interest rates aren't doing people with savings any favours. The savings in debt repayment interest amount to about 15% of the total NHS budget. It has to be better than the way countries like Italy have fared when their policies have seen debt interest costs rise by around the amount of our entire NHS budget. The cuts might be painful but not half as painful as the alternative.

[DT Ralge]

Yes, the cost of our debt dropping is good news and is a vote of confidence in our preparedness to tackle and reduce the debt.

What I can't understand (and haven't understood all the time there has been doubt about the future of the Euro zone) is what exactly is holding up the value of the Euro relative to the Pound. Shouldn't there now be some relationship between market confidence, govt bond and currency rates?

[wednesday1]

It seems that keeping a tighter grip on UK borrowing and tackling the budget deficit is paying dividends.

Whilst Italy's cost of borrowing and financing it's debts spirals out of control and has passed 7%, the cost of financing the UK's debt is falling.

It seems that investors are looking for less risky places to put their money than Italy, Greece, Spain, Portugal and France and are moving to buying UK bonds. It seems the more we are prepared tackle our debt crisis the less money we will need to finance it.

 

http://www.thisismoney.co.uk/money/markets/article-2060225/Cost-government-borrowing-falls-historic-lows-Britain-safe-haven-eurozone-debt-crisis.html?ito=feeds-newsxml

 

The UK is benefiting from its current status as a reliable base for investment as the cost of government borrowing falls to historic lows.

 

Ten-year gilt yields dropped to 2.106 per cent at one point yesterday – their lowest since they were introduced in the 1950s.

 

The UK Debt Management Office, which issues government gilts – or bonds – on behalf of the Treasury, said the UK was a safe haven for investment in the eurozone debt crisis while fears persist over Italy's failure to reduce its debt.

 

...........

 

Two days ago, yields on Italian ten year bonds crashed through the feared 7 per cent barrier.

 

David Miller, partner at Cheviot Asset Management, said: 'The gilt market has not been driven by valuations but by sentiment so the rise in purchases is a partial vote in favour of the UK.

 

'The market movements this week have shown Britain to be a beacon of sanity in Europe and I would expect to see this trend continue until unrest in Europe is soothed by action.'

 

 

 

Yes, Labour were right to keep Britain out of the Euro. Well done chaps.