Oh dear. Wednesday’s £1,750m auction of 4¼ per cent Treasury gilts dated 2049 failed, with a bid-to-cover ratio of 0.93.
That’s the first UK conventional gilt auction failure since 1995 according to Dow Jones. Note the details below.
So is this a sign of things to come?
And is this why Bank of England governor Mervyn King was so concerned about further government spending on Tuesday? Could be.
As to what happens to the unallocated portion, this from the UK’s Debt Management Office:
The unallocated part of the amount on offer at the auction is being held in official portfolios. It will not be sold for a period of at least two months, and in any event only in stable market conditions.
Sounds like the strategy being employed for the sale of some other less-savoury securities in the financial realm.
Now we await the outcome of Wednesday’s buyback auction at 14:45 GMT, which some are also fearful about, considering the last auction’s failure to price purchases at or above the market price.