The UK government hasn't been able to borrow this cheaply since 1703

The UK government hasn't been able to borrow this cheaply since 1703

Or ever, most probably.

Today the UK Government’s benchmark rate of interest hit 1.4%. That’s the lowest it’s been in quite some time. A very, very long time, in fact. The Bank of England has stats on this going back to 1703, the year Sir Isaac Newton was elected president of the Royal Society, when Queen Anne was on the throne.

And as you can see from the chart below, in all that time, yields never dropped this low (though note the numbers on the graph are for full years, except for the most recent figure).


In fact, the likelihood is that interest rates have never been this low. After all, real borrowing costs were probably significantly higher in the era before the Bank of England was set up in 1694, when Governments tended to borrow from goldsmiths and Venetian bankers.

The big question mark is what these low interest rates are telling us. We can be pretty sure that it’s not a sign that the Government is especially solvent at the moment, given the national debt is higher now than it’s been for decades. More likely is that they imply growth is going to be low for some time. Yet another sign, in other words, of what some call “secular stagnation“.

Either way, it’s a landmark of sorts. And another sign of just how odd things are right now in government debt markets.