Britain to Offer a 100-Year Gilt

Here’s an interesting story from our cousins across the pond. The Brits are looking to float a 100-year gilt. The general rule is that the larger your debt, the longer your average maturity should be. Her Majesty’s government currently has a debt of 1 trillion pounds.

Is this a wise move? Well, it depends. If the bond market responds favorably, then yes, it’s a good move. If not, then it’s a bad move. It all depends on what interest rate investors demand. I wouldn’t be surprised if investors like what they see.

The government is also considering never-ending bonds. By the way, something magical happens with perpetuities. When you calculate the yield to maturity, you simply divide the coupon by the price and presto.

If this float goes well, I’d be interested to see the U.S. Treasury give a long-dated bond a try. While we’re at it, I wouldn’t mind seeing a gold-backed bond either.

Posted by on March 13th, 2012 at 10:40 pm


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