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Thursday's gilt auction proves highly successful

While only 24 hours ago the talk was of a failed gilt auction in the UK, the first since 1995, today has seen a successful refinancing of UK debt with £2.99 billion of offers received for just £1.1 billion government bonds on offer. The cover ratio for this particular auction is 2.72, against 1.12 when similar bonds were issued in October and 0.93 for a similar gilt auction on Wednesday. So is the worst over?



While the Chancellor of the Exchequer and the UK government as a whole are keen to point out that Wednesday's gilt auction failure was nothing but a "blip", many analysts will be watching the market carefully over the coming weeks and months. There is no doubt there is serious concern about the level of debt being accumulated by the UK government and the fact this will take decades to pay back.



The government may well be back on track with a successful auction today but tomorrow is another day and each and every auction brings its own problems and issues for investors to consider. As UK debt continues to rise, amid rumours that over £200 billion worth of government debt has to be refinanced in the short term, there will be pressure on the bond market and investors will be looking for the best rates available.

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