Let’s be clear. If a government can print its own money – as the UK can but Greece cannot – it need never go bust, simply because the central bank can buy as much government debt as it has to. Granted, printing money to buy gilts might be inflationary. But Moody’s statement justifying its downgrade never mentioned inflation. And anyway, if the government’s creditworthiness is impaired by weak growth – as Moody’s believes – printing money might be the policy to boost growth.
The government’s creditworthiness, then, should not trouble gilt investors - and, indeed, the downgrade hasn’t done so. But plenty else should worry them. Here are six reasons why gilts might sell off in coming months.