NeilW wrote:dealtn wrote:ten I laugh out load on this site, but you achieved it. Congratulations.
Cancel Gilt issuance and see who blinks first.
Are you going to explain the physical mechanism? Or just stick with the belief?
I've explained very clearly how higher interest rates cannot happen because there is no institutional mechanism for it to occur.
I know the market well.
There are very few people on the planet, currently alive, that can claim to have set up a GEMM, let alone on this site. As someone who can legitimately say that I am fairly certain I know how that market operates. The prices of Gilts in both the primary issuance market, and the secondary trading market (and the much smaller other markets) are not set by the Government, or any of its agencies I'm afraid, but by demand/supply interaction in that market. The issuer has no power to ask for less money to be paid.
There are many cases of drops in demand for new Government paper, and further more increased and distressed selling of already issued paper in the secondary market. There is plenty of physical mechanism for that to have happened in the past, and that is no different to either now or the future.
In the primary market you can have uncovered auctions, in the secondary market you can have selling driving prices lower. Each marginal transaction moving prices lower as sellers only attract new buyers at progressively lower prices (or higher yields). As secondary market yields rise the necessary price, and connected yield for primary issue reflects this. The issuer, being reliant on the market and buyers, has no choice (other than not to issue) but to accept a higher rate of interest, which usually means a higher coupon.
If you add to this mix the facts that many sellers maybe overseas based they might, as well as selling government paper, also be selling £s. This £s sold will be bought (of course) but again, this might necessitate a fall in the price of £ vs alternative currencies. In turn this may prove to be inflationary, and the compensation by way of interest for (new) holders of UK assets might be a rising interest rate.
If prices (of which interest rates, and the £, are ones) are not set by the market, who is setting that price, and making a rule such that "interest rates can't go up"? How are "they" able to achieve this when no other free market countries have been able to, be that now or in the past? The track record of command economies attempting to achieve the same doesn't inspire confidence it can be done, and certainly is limited in evidence it has been achieved.