London - Arabstoday
London Britain\'s fin-ance minister is looking at ways of taking advantage of the country\'s super-low borrowing costs by considering the launch of bonds that would be repaid over 100 years, published reports said Wednesday. The Financial Times and other British papers said the idea could be part of George Osborne\'s annual budget announcement next week. The Financial Times also said that Osborne is looking at the possibility of issuing bonds which never mature. With so-called perpetual bonds, the government would just pay interest. At the moment the UK and other countries sell off their debt in the form of bonds. These bonds pay interest before being paid back after a set period of time — the average being around ten years. If the UK issues perpetual bonds, it would just pay the interest for a very long time up until the government decides to redeem them, which theoretically could be never. Britain is currently enjoying super-low interest rates in the markets after the Bank of England slashed interest rates to record lows and enacted a monetary stimulus program designed to keep a lid on borrowing rates. Even though Britain\'s deepest recession since the Second World War is officially over, the economy is struggling to get any momentum as unemployment is near a 17-year high and the government pursues a debt-reduction programme designed to get the public finances back into shape. Mark Ostwald, analyst at Monument Securities, said the government\'s interest in longer-term debt amounts to an admission that \"lowering budget deficits and indeed overall debt burdens in the western world will not be achieved by austerity alone.\" A key question is how much demand there would be from investors. While hedge funds, which want to see returns on a relatively short-term basis, may not be interested, the longer-term bond issues may appeal to pension funds and insurance companies, which seek out financial security over a longer timeframe. Last year, sales of century bonds included $1 billion sold by the government of Mexico, yielding 5.96 per cent, and a $350 million issue by the California Institute of Technology at 4.744 per cent. Rabobank of the Netherlands sold $350 million in century bonds in 2010 at 5.8 per cent. It wouldn\'t be the first time that Britain has issued such long bonds.