International investors attracted to UK gilts

International investors are purchasing larger amounts of UK government bonds than ever before, thanks to the Bank of England's quantitative easing programme and Britain's relative distance from the eurozone crisis.

That is according to the Financial Times, which reports that this driving demand has helped the government's long-term benchmark borrowing costs fall to levels last seen in 1890s, due in large part to acquisitions by leading sovereign wealth funds.

The news provider reports that international investors bought gilts worth £28.87 billion in October and November, the largest amount in a two-month period ever recorded by the bank.

Overseas investors are also bringing their private wealth to the UK because the coalition government's austerity programme is helping to ensure it retains a triple-A credit rating at a time when economic turmoil is rife across the eurozone.

Experts appear unsure on how this market will develop. An insider at the Treasury was quoted as saying: "Some analysts have warned that UK gilts would be hit if the eurozone recovers and makes the UK relatively less attractive. Others say Britain would be hit by association if the eurozone crisis gets worse: you can’t have it both ways."

Meanwhile, France is expected to see strong demand for its ten-year bonds when they are auctioned today, despite the threat of a downgrade from its triple-A credit rating.

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