Today the UK has sold £4.75bn of a UK Government Bond repayable in 50 years time at an annual coupon of 2.5%. Wow. Firstly I would love to know what interest rates/ inflation will be in 50 years time!
This really does show how far we have come. Financial markets / Investors are currently willing to accept only 2.5% (nominal) return per annum on something that will not be fully repaid for 50 years! UK inflation has averaged 2.25% over the last 10 years. If that continues then the capital amount lent to the UK Government will barely maintain its value. Investors are willing to not receive any compensation for the risks involved for lending for such a long period (of course there is a secondary market but traditionally investors would want some sort of return for this).