Where can I find the interest rate that the UK is charged on its national
debt, and comparative figures for the rest of Europe?

Also a chart graphing their progress over time would be helpful!

Thanks

Jake wrote:
Where can I find the interest rate that the UK is charged on its national
debt, and comparative figures for the rest of Europe?

Also a chart graphing their progress over time would be helpful!


There isn't a simple answer to that. The government issues bonds
(gilts) to raise money. The interest rate that it pays depends on the
rate of the gilts that have been sold (and the price that they
initially sell at)

The price of the gilt changes over time to reflect what the coupon is
compared to what you could get elsewhere.

For example, there are 2.5% perpetual bonds that are currently trading
at around 50p in the pound, so, effectively, buying them now gets you
5% but the government is only paying 2.5% on the original money.

I would guess that probably means that the government would have to
offer around 5% currently in order to borrow more money long term in
today's market.

(The rate it has to pay will also depend on the time to maturity and
whether the bond is callable.)

The 40billion or so of premium bonds are paying around 1.5% (I think).
3.25 gilts maturing in 12 months are trading a little above 102p in
the pound. Works out as a gross profit of around 0.6% if you hold to
maturity. So that gives some idea of short term rates.

Tim.

wrote in message
...


Jake wrote:
Where can I find the interest rate that the UK is charged on its national
debt, and comparative figures for the rest of Europe?

Also a chart graphing their progress over time would be helpful!


There isn't a simple answer to that. The government issues bonds
(gilts) to raise money. The interest rate that it pays depends on the
rate of the gilts that have been sold (and the price that they
initially sell at)

The price of the gilt changes over time to reflect what the coupon is
compared to what you could get elsewhere.

For example, there are 2.5% perpetual bonds that are currently trading
at around 50p in the pound, so, effectively, buying them now gets you
5% but the government is only paying 2.5% on the original money.

I would guess that probably means that the government would have to
offer around 5% currently in order to borrow more money long term in
today's market.

(The rate it has to pay will also depend on the time to maturity and
whether the bond is callable.)

The 40billion or so of premium bonds are paying around 1.5% (I think).
3.25 gilts maturing in 12 months are trading a little above 102p in
the pound. Works out as a gross profit of around 0.6% if you hold to
maturity. So that gives some idea of short term rates.


Thanks Tim.

The reason I was asking was I wanted to compare the difference in rates
charged on the UK national debt compared to the rates charged on (say)
Germany and France's, in 2009 and 2010 - I have heard that in 2010 for the
UK it was double what the rate was for Germany, for example...

Jake wrote:

The reason I was asking was I wanted to compare the difference in rates
charged on the UK national debt compared to the rates charged on (say)
Germany and France's, in 2009 and 2010 - I have heard that in 2010 for the
UK it was double what the rate was for Germany, for example...

All I can suggest is to find some roughly equivalent bonds issued by
Germany, France and the UK - similar maturity date, coupon (possibly
issue size) and then compare their historical prices.

From the price, coupon and time to maturity you can work out the total
profit if you held to maturity which will then give you the yield.

Cost = price/100*1000
Total return = 1000 + 1000 * coupon * years to maturity

yield to maturity = ((Total Return / Cost) ^ (1/ years to maturity)) -
1

(^ is power)

(strictly you should adjust for the accrued for the date that you have
the price for but it should be a fairly small correction if the bonds
have long maturities)

I don't know how important it is for the different bonds to be roughly
equivalent. In theory it shouldn't matter if you are comparing a 7% UK
treasury with a 3% German bond provided they have the same time to
maturity but that's theory rather than practice.

Other than holding some cash as index linked treasuries, my only
dealings with bonds have been via ETFs so what little knowledge I have
is all theoretical.

Tim.

On 26/01/2011 14:23, Jake wrote:
Where can I find the interest rate that the UK is charged on its national
debt, and comparative figures for the rest of Europe?

Also a chart graphing their progress over time would be helpful!

Thanks


I found this difficult to track. Allyson Pollock does work on UK
Finance, and she's written about US versus UK debt interest, but not to
my knowledge published/found the figures - from memory she wrote
something along the lines that 'UK paid twice the rate of debt interest
as the US'. Twice of not a lot - 0.5 to 1% over the 20C, I think.

Otherwise, the Treasury web site is pretty good, and I've found the
staff there to be very helpful. This page is likely to have something:

http://www.hm-treasury.gov.uk/psf_statistics.htm

They clarified that the UK has borrowed to finance debt without paying
off any capital for about 10 years. Prudential nation state financial
management eh? ;-)

If you find out please post your findings.

Thanks, Rob

Jake wrote:
Where can I find the interest rate that the UK is charged on its national
debt, and comparative figures for the rest of Europe?

Just in case it isn't clear from the other answers, there seems to be a
false assumption in the question that the UK goes to some super bank
that sets interest rates.

What actually happens is that the government sets interest rates, and
then sees whether people will buy its debt at those rates, and those
people are are largely pension funds and individuals; anyone with a
national savings account, including premium bonds, is one of the
government's lenders.

Some of the interest rates are index linked and some are fixed for the
duration of the loan.

I think you can't easily find these information because the Government usually hide these kinds on information.