A 100-year gilt could prove financially and politically very embarrassing says Peter Baum, director at Glendevon King Asset Management.
Chancellor George Osborne has previously outlined plans for a 100-year gilt, as well as announcing the possibility of a perpetual gilt in the Budget, but Baum has warned that such issuances will probably prove to be a “damp squib”.
“Investor demand will determine if the bond launch will be a success, and this will be driven purely by the coupon level and bond structure which will have to have very sweet characteristics,” he says.
“Personally, I wouldn’t touch it with a bargepole even if the coupon was 50% higher than the probable estimation.”
Baum predicts that gilts this long-dated will fail to generate sufficient demand to have an impact on the overall economic environment.