Did George Osborne save the world?

Andy White (kudos for using your real name in a world of anonymous commentators) takes issue with my blog on the invisible bond vigilantes that were appeased by George Osborne’s  emergency budget.

White says my chart shows bond investors wavering before the election, after which they ploughed  in. Further he says “it is incorrect to say that this [UK falling bond yields] is caused by fears over the Euro. The French and Germans are not likely to run into difficulties and if investors wanted Euro assets they could run there rather than Britain, which has after all had a weakening currency. Or to America where continued stimulus should be increasing growth prospects if the editorial line of the independent is correct.”

I suppose on UK bond yields the point is debatable.

Looks like a downward decline from late February to me, albeit one that accelerated in early May.

But I think White is wrong in his argument about eurozone debt. Investors did pile into German bonds over the same period.

And French bonds:

The ran for the safety of US Treasuries too from April:

Japan’s bonds became more popular aswell over the same period:

Was  all that a response to Osborne’s emergency budget?

Take a look at what happened to dodgy Spanish and Greek bonds over the same timeframe.

Investors wanted out.

There was a mass flight to safety in international bond markets beginning in April  (and still continuing). And the evidence suggests that Britain was regarded as a safe haven before Osborne’s emergency budget

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• paininthehead

  The only thing George Osbourne has saved is his own money when he switc hed his home to one with a £450000 mortgage on it and claimed the interest but oh he wasn’t breaking the law, he never even had to apologise to the house much like the moat cleaners and duck house purchasers and of course porn purchasers he like most of hisparty colleagues are no better than benefit cheats and deserve the same contempt.
  his policies have led us to the point of slumpand who does he chose to save the nation disabled people and those on the breadline while allowing the weal;thiest 2 % tax breaks along with banks anmd other big business, meanwhile wealthy merve the swerve from the BoE tells the TUC, ‘ YOUR MEMBERS ARE RIGHT TO BE ANGRY WITH POLICY MAKERS BUT YES IT’S YOU WHO MUST BE CUT MEANWHILE NO SIGN OF THE SEMI NATIONALISED BANKS PAYING BACK THE TAXPAYER WHAT THEY OWE THUS INFLICTING ANNILATION ON THE NATIONAL DEBT WHICH WILL HAVE TO RISE IF CURRENT POLICY IS SEEN THROUGH TO THE BITTER END ALL IN IT TOGETHER, 2 WORDS THE SECOND IOS OFF

• http://www.facebook.com/people/Andy-White/1613220003 Andy White

  It is important to note that you would not expect a change in the path of bond returns to happen on the date of George Osborn’s budget. For there to be a significant effect at that point he would need to either seriously exceed or disappoint the expectations of the market, whereas he did pretty much what he has been saying he would do for the last year.

  In terms of the flight to safety argument the extent to which these graphs map on to each other certainly supports your point. We should be thankful that we are still viewed as a place for capital to run to. Note the fact that our debt was more expensive than Spain’s until mid April, a country you yourself are now using to illustrate a bond market falling apart.

  The fact that interest rates are low and falling is important for the future growth of the economy as this is the only way we can now deliver a stimulus.

  Ultimately keeping interest rates as low as possible, for as long as possible, has been the stated economic policy of the government for well over a year. The ability of the economy to remain a place of safety and keep interest rates down will be the measure of the government’s success or failure.

  As Spain shows this is not something that can be taken for granted.