U.K. gilt auction bombs; bonds sell off
The failed auction comes as the U.K. government is selling massive amounts of debt to fund bailouts and stimulus packages -- efforts that could drive the U.K.'s deficit to as much as 11% of GDP by 2010. And of course, the Bank of England recently said it would buy as much as 75 billion pounds in both corporate and government bonds there, essentially monetizing the country's debt.
Ten-year gilt yields surged as much as 20 basis points from low to high before paring about half the move. We have seen spillover selling in U.S. bonds as a result, with the long bond futures down 1 7/32 as I write.