UK to offer inflation-tied 50 year bond

The UK Debt Management Office is considering issuing an inflation-linked 50-year bond in the third quarter of 2005.

A conventional 50-year bond is already set to go on sale in May, but issuance of a long-term bond linked to inflation, which would protect investors from future price rises and which would satisfy a growing demand, is thought to be a good possibility later on.

Besides answering a demand, the issuance of an inflation-linked bond is seen as a less-expensive way for the government to finance rising debt. T

hey are also seen by investors as a hedge against inflation. This is an important factor due to the fact that the current period of low inflation may not last and many investors have liabilities that will rise when inflation rises.

Some investors do worry, however, that low bond yields now, and high prices, will undermine the real rate of return on long-term bonds.

Story link: UK to offer inflation-tied 50 year bond