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Osborne considers launch of 100-year bond

Chancellor George Osborne aims to launch a Government bond with a repayment date lasting 100 years or more to take advantage of historically low interest rates.

In next week’s Budget, Osborne is expected to announce plans for the Debt Management Office to test market appetite for the “super-long gilts”.

According to reports, the Chancellor also wants to test the case for launching “perpetuals”, bonds that pay interest indefinitely, with the principal never being repaid.

Speaking to the BBC, Treasury officials described the 100-year bonds as like the country taking out a low rate fixed-term mortgage .

The official told the BBC the move could save the country £20bn in debt interest over the next five years.

The last time such a long-dated bond launched was in 1932. It was known as the “war bond” and was issued to pay for the costs of the First World War with a yield of 3.8 per cent.
 

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Why are we paying interest on loans made to the banks to bail them out they should be paying it of before any interest or bonuses are paid to them selves.

  2. OK so suppose I had some money to invest. Why would I choose a bond that never matures and gives me less than the current official rate of inflation (which itself is about half the real “on street” rate)?
    Who buys these things? Come to think of it who buys Greek Bonds etc?

  3. Why stop at 100?

    Make it 999, or 666 if you are that way inclined.

    Gawd ‘elp us all Gov

    Can you imagine what the FSA would have to say if an IFA was flogging investments with a 100 year term? Or 100 year mortgages?

  4. HMT is looking into interest rate swaps because the downside was not adequately explained by the banks.

    Can HMT explain the downside of 100 year bonds?

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