Report from the FT:
The UK Treasury will on Monday assume full responsibility for Britain’s £1.2tn debt stock in the event of Scottish independence, in an attempt to head off market jitters ahead of September’s referendum.
- There were some fears gilt investors could start demanding a risk premium in the coming months “on the grounds that some UK debt could be transferred to a newly-independent Scotland with no credit history”
- The UK Treasury issed a “cast-iron guarantee” that London will take care of all debt issued by the UK government
- Treasury still expects Scotland to pay its share of the debt & to reimburse the rest of the UK
- Scotland has already said it would take responsibility for servicing and refinancing a fair share of UK debt, without taking on direct legal liability for bonds already issued
“However, Alex Salmond, Scottish first minister, has repeatedly said that willingness to take on UK liabilities would depend on Scotland also gaining a fair share of UK assets, which he suggests includes continued shared use of the pound”
More at the the Financial Times (gated, but can be read with a free registration): Treasury gives debt pledge on Scotland
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GBP/USD has opened virtually unchanged from Friday’s closing prices in the US.
Currencies are quiet across the board.
