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Record demand for £4 billion government bond issue

Despite the fact there is great concern over the UK budget deficit, which is now forecast to hit £175 billion, a £4 billion government bond issue was nearly 3 times oversubscribed today. At a time when investors in the UK stock market are concerned about the immediate future of the UK economy and the ever-growing national debt, it seems rather strange that today's bond issue has proven to be so popular.

The matter becomes even more bizarre when you consider that two of the world's biggest bond investors, Pimco and Blackrock, also turned negative on UK government bonds today. The all party Treasury select committee has also been very vocal in its criticism of the UK government's handling of the UK economy and UK finances which also adds a touch of irony to the fact today's bond issue by the government was nearly 3 times oversubscribed. So what next?

It seems almost inevitable that the UK government will seek to exploit this new found, and unexpected, demand for bonds with further issues in the short to medium term. While this will make little difference to the overall government debt situation it will give more breathing space for the authorities in the short term and make refinancing of the national debt a fraction easier.

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