Britain's finance minister George Osborne will next week unveil plans for bonds of at least 100 years, as the government seeks to capitalise on historically-low interest rates, sources said today.
Chancellor of the Exchequer Osborne will use his annual budget statement to launch a consultation on super-long bonds and could also unveil perpetual gilts, on which the capital is never repaid but interest is charged forever, a Treasury source said.
"The chancellor is expected to announce this at budget" on March 21, the source told AFP. The coalition government wants to take advantage of current ultra-low British bond interest rates to borrow money cheaply from institutional investors and pay it back over an extended period.
"This is about locking in for the future the tangible benefits of the safe haven status we have today," the source said. "The prize is lower debt interest payments for taxpayers for decades to come. It is a chance for our great grandchildren to pay less than they otherwise could have expected to thanks to this government's fiscal credibility."
British state bonds, or gilts, are in huge demand as investors are reassured by the government's efforts to slash its debt and avoid the severe troubles that have rocked the euro zone.
In addition, the Bank of England is buying massive amounts of them with newly-created money that it hopes can in turn be used to stimulate an anaemic economic recovery.
Rates on British gilts currently stand at record lows of about 2% and stand even below countries with lower budget deficits than Britain, the Treasury said yesterday.
The Bank of England last week maintained the level of its asset purchasing scheme aimed at boosting lending among commercial banks - at £325 billion sterling.
Its nine policy members also voted to hold the Bank of England's key interest rate at 0.5% with Britain at risk of fresh recession and three years after it slashed UK borrowing costs to the current record-low.
