Historic gilt lows reflect improved debt outlook, but growth fears remain
New lows in gilt yields following last week's spending review have been seen by some analysts as a vote of confidence in the UK government's austerity plans. Other observers, however, say they reflect something else entirely.
Record low yields on UK gilts signal market expectations that the government will successfully lower its debts, but also that a period of low growth lies ahead.
The UK Chancellor of the Exchequer, George Osborne, announced on October 20 the results of the government's spending review, which will result in £81 billion of spending cuts. Yields on the benchmark 2.75% gilt due to mature in January 2015 fell to a low of 1.441% the day after the announcement. On October 25, the bond was trading at 1
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