The moment of truth! For the first time in the history the UK government permits Scotland sell bonds

Sept. 19, 2013 - PRLog -- According to UK Treasury research the British government permits to sell bonds ,

what means that  there is enough demand for Scottish government.  The research

showed that  the Scottish government as  a beginner to bond market might at least pay

a higher rate of interest just in case to avoid risk and liquidity.

For everyone who is more or less knows the bond market does not come a surprise

that the Scottish government is borrowing costs from the bond market and it would be

higher than the UK government.

It will be a big news if Westminster goes straight ahead and gives permission to

Scotland to sell its own bonds. And there might be a serious reasoning about this

news because the treasury has already published a summary of responses whether or

not the UK government should grant Edinburgh a serious power to sell its own bonds.

Regardless the end of the story and the  causes that might bring the result, this is the

start of a big story, as the decision is very important and somehow touchy, as it is the

political change in the United Kingdom.

This intriguing news did not lack attention from the institutional investors who

responded questions about Scottish bond including: Scottish powerhouse- Baillie

Gifford & Co, Barclays & Ignis asset management and Goldman Sachs Group Inc, all

of them  are very serious players in the financial market.

The research respondents -19 from both private and public sectors said that there

might be enough demand for approximate  2.2 Billion pounds of Scottish bond.

As it turns out from the Treasury research this legislation is not only financially or

politically important, we are all the witnesses of the historical change, this is the

biggest transfer of fiscal power decided by Westminster in the whole  history of the

united kingdom.

As the majority of the respondents suggested, before there will be enough demand for

the bonds, the Scottish  government will be just just forced to pay interest rate much

more above the rate enjoyed by the Westminster.

In the summary of the Treasury it is suggested that a borrowing such a high cost

might reflect: “ the perceived lower creditworthiness of the Scottish government,

owning in a particular to its narrower revenue base and a lack of track record in

borrowing, as well as the lower liquidity of Scottish government bonds compared

with UK gilts”.

Some of the Treasury research respondents said that the higher rates would be paid

by the Scottish government it might be declined in a while if Scotland shows the

discipline in fiscal tasks and somehow achieve a good reputation of a bond issuer who

is worthy for credit.

One of the research respondents had quite an interesting suggestion about the

expected movements, he said that Scotland may pay low interest rate rather than  the

united kingdom if  backed bonds will be sold by north sea oil revenues.

The treasury made a research and asked 19 participants. The result of research showed

that six supported the idea and want the Scottish government to be allowed to sell

its own bonds, three of them were against, and 10 did not come to an exact and clear

answer. Accordingly to this research and many doubts, the common uncertainty of the

probable changes in the politic of the United Kingdom does not give legit arguments

to predict what is going to happen. But this a fact that we are attenders of  a political

and economic change that might have a historical meaning for the both countries.

According to the treasury summary the UK government is “under the gun”, what

means they have to make a decision whether to grant or not the Scottish government

the power to sell its own bonds “Ahead of capital borrowing powers being introduced

in 2015-16”.

While the financial market for the Scottish bonds on a global scale is suspected to be

small, such bond-issuing grant the Scottish government would be a remarkable news

in the United Kingdom, after all this happens for the first time in the history of the

both countries.

It is said in the treasury research summary that it will be sold by the devolved Scottish

government that is a part of the UK.

The Scottish government declared that there will be held a referendum vote next

year in September, the question of the referendum will be: “should Scotland be

independent country?”

According to The Scotsman newspaper the support level of independence has been

running under 35 percent recently.