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.

Nangle, Barings: 1.43% seems to be a vote of confidence

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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