UK Chancellor Osborne Considering 100-Year Gilt Issuance

The UK government announced this week that it is considering selling gilts with maturities of 100 years, or even possibly so-called 'Perpetuals' that would never mature, just offer investors a fixed flow of coupons, forever.
There are precedents - Mexico, the French Power company GDF Suez, the Dutch bank Rabobank, and even the Massachusetts Institute of Technology have all issued 100-year bonds. and the UK issued perpetuals both between the World Wars and in the 18th Century to mop up after the South Sea Bubble collapse.

Where the current gilt is concerned, the UK government intends to conduct a consultation process to uncover the depth of investor appetite, details of which will be revealed in Osborne's budget speech next Wednesday.

What's good for the borrower is bad for the lender?

Thus far, opinion seems divided, with some pension funds indicating that the maturity may be too long, even for them, and that they'd prefer
more 50-year issues. On the other hand, a guaranteed stream of income and return of capital from a country that stands more chance than most of being around and solvent in 100 years, holds great attractions for investors still scarred by the events of the last 5 years.

There is also a statute forbidding the Bank of England from ever defaulting hence, (assuming the UK resists all temptations to join a currency union!), the Old Lady of Threadneedle Street would always just print the money required if necessary.

On the other hand, investors may be deterred by the simple fact that if it makes great sense for the government to marginally lengthen the
average maturity of it's liabilities and to borrow at the lowest rates seen in decades, and not often seen over the centuries, then maybe the
converse holds thrue that it's not a good deal for them, on the other side of the trade.

What seems certain, however, is that a successful issue of these securities would be unalloyed good news for the UK Government. What better PR for faith in the enduring value of the British Government's promise and the UK's safe-haven status could one imagine?