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May 20, 2020, 11:25 a.m. EDT

Britain sells its first bonds at a negative interest rate

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By Steve Goldstein, MarketWatch


Getty Images
Britain's Chancellor of the Exchequer Rishi Sunak arrives in Downing Street in central London May 18, 2020.

The U.K. on Wednesday became the latest country to sell bonds at negative interest rates, showing investor demand for government securities is so high than some are willing to pay for the privilege.

According to the Debt Management Office, the U.K. auctioned £3.75 billion ($4.6 billion) of 3-year /zigman2/quotes/211347170/realtime BX:TMBMKGB-03Y 0.00%  notes at an average rate of -0.003%.

The bid-to-cover ratio was just 2.15, which was the lowest since March.

The negative-yielding bond auction came as the coronavirus pandemic crushes economies across the world. Data released earlier on Wednesday showed U.K. inflation at nearly a four-year low of just 0.8% in April.

Officials at the Bank of England, notably Gov. Andrew Bailey, have discussed the possibility of setting negative interest rates though it’s not seen as likely anytime soon.

“Lowering the bank rate to 0.1% was always likely to mean that gilt yields could dip below zero. In addition, demand from the BoE has outstripped the supply of new gilts, following £100 billion of quantitative easing in just two months. That is before considering that investors, worried about the economic shock and falling inflation, have also sought out safe haven assets recently,” said Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson Investors.

According to data from Tradeweb as of the end of April, France had 1.4 trillion euros ($1.5 trillion) of debt outstanding with negative yields, and Germany had 1.24 trillion euros.

The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -0.71%  meanwhile edged up 0.3%. Experian /zigman2/quotes/210252954/delayed UK:EXPN +1.30%  rallied 8% as the credit-checking company said the pandemic had only a limited impact on ts fiscal fourth quarter as it maintained its dividend.

Engine maker Rolls-Royce /zigman2/quotes/203646520/delayed UK:RR -5.13%  gained ground on its plan to cut 9,000 jobs.

/zigman2/quotes/211347170/realtime
add Add to watchlist BX:TMBMKGB-03Y
BX : Tullett Prebon
-0.15
0.00 0.00%
Volume: 0.00
Sept. 18, 2020 5:02p
loading...
/zigman2/quotes/210598409/delayed
UK : FTSE UK
6,007.05
-42.87 -0.71%
Volume: 1.54M
Sept. 18, 2020 4:56p
loading...
/zigman2/quotes/210252954/delayed
UK : U.K.: London
3,124.00 p
+40.00 +1.30%
Volume: 2.49M
Sept. 18, 2020 4:35p
P/E Ratio
53.31
Dividend Yield
1.19%
Market Cap
£28.39 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/203646520/delayed
UK : U.K.: London
180.15 p
-9.75 -5.13%
Volume: 20.71M
Sept. 18, 2020 4:35p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
£3.48 billion
Rev. per Employee
N/A
loading...

Steve Goldstein is MarketWatch markets editor for Europe. Follow him on Twitter: @MKTWgoldstein.

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