The UK has negotiated a bond issue - a government loan in the form of bonds issued by the government and purchased by investors. A first: this bond is at negative interest. In total, the UK issued 3.8 million pounds of bonds at a negative rate of -0.03%.
A negative interest rate that doesn't discourage investors
Compared with equities, government bonds often serve as a safe haven, which explains why investors are so interested in them despite negative interest rates. Above all, they see them as a way of sheltering their money.
What's more, these securities sometimes appreciate in value, giving investors the opportunity to resell them before maturity and realize a capital gain. Moreover, investment funds are often obliged to hold safe assets, hence the purchase of government bonds even when they are not yielding.
Investor demand for these sovereign bonds has already exceeded £8 billion.
Bank of England no longer rules out negative interest rates
As a result of the pandemic-related economic crisis, bond yields are at record lows. Against this backdrop, the Bank of England's (BoE) key interest rate is also historically low, at 0.1%, and BoE Governor Andrew Bailey, after previously opposing it, is no longer ruling out negative interest rates.
The Governor is studying the impact of negative interest rates adopted by other central banks, such as the European Central Bank, which stated in its March economic bulletin that "negative interest rates have supported economic activity and ultimately contributed to price stability."