This can’t be what the U.K. was hoping for so early in its stimulus plans:
A U.K. auction of ordinary government bonds failed to draw enough bids to cover the amount on offer for the first time in more than a decade.
The auction involved 40-year bonds, which typically see more problems with demand. Still, the poor auction result comes at a very difficult time for the gilts market, when investors and banks are trying to swallow record issuance of U.K. government debt. Bank of England Governor Mervyn King told a U.K. parliamentary committee Tuesday that the government needs to be "cautious" about further fiscal stimulus.
U.K. government debt and the pound both moved lower on the news, and gilt futures have now erased all their price gains made since the Bank of England announced March 5 that it would start buying bonds to boost the money supply.
"Having flirted with a failed conventional auction twice over recent weeks, the market has finally witnessed one," said John Wraith, head of sterling rates at Royal Bank of Canada Capital Markets.
More here.
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