Barry Ritholtz provided these comments on this issue earlier this morning..."Out a little while ago, the UK government failed to get enough bids for its 40 year Gilt auction. This comes even with the UK government in the market weekly to buy Gilts to influence longer term interest rates lower. The UK 10 yr yield is now at a 3 week high and demonstrates the huge risk that the UK and now the Fed is taking on in buying bonds to manipulate the level of interest rates."

Further Non-Confidence - VHF

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U.K. Bond Auction Fails for First Time Since 2002 on Brown Plan

By Kim-Mai Cutler

March 25 (Bloomberg) -- The U.K. failed to find enough buyers for 1.75 billion pounds ($2.55 billion) of bonds for the first time in almost seven years as debt investors repudiated Prime Minister Gordon Brown’s plan to stem the worst economic crisis in three decades.

Gilts slumped after the London-based Debt Management Office, which manages bond auctions on behalf of the Treasury, said investors bid for 1.63 billion pounds of the 40-year securities. The last time the U.K. government was unable to attract enough investors was in 2002 when it tried to sell 30- year inflation-protected bonds.

“This is a warning signal investors are sending to the government,” said Neil Mackinnon, chief economist at hedge fund ECU Group Plc in London, who helps manage about $1 billion in assets and is a former U.K. Treasury official. “Investors are giving the thumbs down to the gilt market.”

Prime Minister Brown’s government plans to sell a record 146.4 billion pounds of debt this fiscal year and as much as 147.9 billion pounds in 2010 as he tries to pull Europe’s second-largest economy out of its worst recession since 1980. Brown’s plan drew criticism yesterday when Bank of England Governor Mervyn King told lawmakers in Parliament in London the government should be “cautious” about spending and deficits.

“Brown’s situation is economically extremely uncertain and highlights how we are now in uncharted territory,” said Mark Wickham-Jones, a professor of politics at Bristol University.

The yield on the 10-year gilt rose five basis points to 3.43 percent by 12:57 p.m. in London. The 4.5 percent security due March 2019 slipped 0.47, or 4.7 pounds per 1,000-pound face amount, to 109.36. The yield on the two-year note rose two basis points to 1.28 percent. Yields move inversely to bond prices.