UK borrowing costs at record low

The UK government’s cost of borrowing in markets briefly fell to a record low last week.UK borrowing costs at record lowThe 10 year gilt yield fell below 2% in thin post Christmas trading.

The 10 year gilt yield – which indicates the interest rate the Treasury would probably have to pay if it wanted to borrow more money for that period – later recovered to about 2.035%.

The yield has never before fallen below 2% throughout a history that stretches back to the Victorian era.

The low level reflects market expectations that the UK economy is likely to experience years of low growth and low inflation, with the Bank of England holding short term interest rates close to zero.

USA and Germany have also seen their borrowing costs fall to historic lows in recent months for similar reasons, while stagnant Japan has experienced ultra-low bond yields for the last 15 years.

The fall is in stark contrast with the experience of eurozone governments – other than Germany.

Their cost of borrowing has risen sharply in response to their economic troubles.

Unlike the UK and US, they do not control their own central banks or their own money supply, giving rise to market fears that they may run out of money to repay their debts.

On Thursday, the ONS revised up its overall estimate for growth in the UK economy between July and September of this year.

The UK economy grew by 0.6% over the period, faster than previous estimates of 0.5%, with growth driven by strong performances in the service sector and construction.

January 3, 2012  Tags: , ,   Posted in: Business Growth, Business Survival, Business Win, Growing Economy, Uncategorized

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