Where’s the bond crisis?

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Danny Alexander said last weekend:

When we came into office there was a serious danger that what was going on in the eurozone, where increasingly questions were being asked about how to pay off their debt, those sort of questions could have started to be asked of the UK. But we have taken the country out of the danger zone by acting swiftly.

It was the standard Treasury and right wing nonsense that we must live in fear of the bond gods — those cruel and heartless (mthical) entities who will destroy us if only we step out of line for a moment by spending a pound more than necessary on the well being of the UK population.

Then the FT reports today:

Interest rates on UK government debt saw their sharpest fall in 18 months after the decision by the Federal Reserve in Washington to open the door to a new round of stimulus measures to boost the US economy.

So the bond gods have been appeased. Not by cuts in government spending. But by government spending. After all QE is “used in both the US and the UK to combat the recession after the financial crisis, [and] involves pumping cash into the economy by buying long-term assets such as government bonds”.

The result? Yields on the benchmark 10- year gilt, which move inversely to prices, dropped by 15 basis points to 2.97 per cent, the biggest drop since the Bank began its government bond-buying programme in March 2009.

Government works Danny.

Remember that.

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