Safe haven UK sees gilt yields at record lows

UK BORROWING costs fell to record lows yesterday as investors scrambled to British government debt as a safe haven.

Yields fell to 2.21 per cent on £3bn of gilts maturing in 2022.

Bonds on the secondary markets continued to attract buyers, pushing yields down to a low of 2.081.

As a result investors took the opportunity to buy an additional £300m of 2022 gilts – the maximum available under the post-auction option facility.

However, US bank State Street announced its withdrawal yesterday from gilt issues, despite only becoming a primary dealer in September.

The bank blamed the Volcker rule, which is intended to stop banks gambling on financial markets with their own capital.

At a time of crisis in Europe, some banks are becoming worried that if they buy government bonds, they will be left holding them if demand dries up.