UK government raises £7 billion
UK government Debt Management Office (DMO) has this evening confirmed the biggest ever sale of sovereign debt to carried-out through a syndicate of UK banks with over £7 billion raised for the UK coffers. Initially there were plans to raise between £3 billion and £5 billion but due to significant interest from pension funds, insurance companies and fund managers this figure was increased to £7 billion.
With 94% of the issue taken up by UK-based investment companies the balance of 6% was taken up by overseas investors. The 25 year gilt carries a 4.5% coupon and is in stark contrast to the last UK government gilt sale which flopped. This is yet another sign that the UK economy is starting to improve and investors are more than happy to invest in UK sovereign debt despite the fact that the government has built up a £1 trillion "overdraft".
While the £7 billion will be well received by the UK Treasury it is merely a dot in the ocean although it will certainly help in the short-term. The only real way for the UK government to refinance and pay down their debt is to increase taxes and reduce expenditure in the public sector, something which is very much at the forefront of voter's minds as we approach the next general election.
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