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UK Gilt market continues to rise

As we covered last week, the UK gilt market continues to rise on expectations that the Bank of England will soon pump up to £150 billion into the market by buying up government securities and other financial instruments. The acquisition of these investments, via quantitative easing, would increase liquidity in the market place for both the government and financial business in the UK.

It is hoped that this increased liquidity will filter through to the general business arena and increase funding lines available for the UK economy. Despite billions upon billions of pounds of UK taxpayers money being pumped into the UK banking system we have seen no marked change in funding lines and many businesses have fallen foul of cash flow problems. It will be interesting to see how and when this new policy by the Bank of England actually kicks into the economy because historically, in places such as Japan, there has been a significant delay between quantitative easing being introduced and funding lines improving in the general business arena.

This really is the last throw of the dice for the UK authorities because if quantitative easing does not improve the prospects of the UK economy in the short term then we could see the onset of a potentially long-lasting depression which would wreck the UK economy.

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