The government sold £4bn of bonds today with an interest rate of 5.668%. Seems nobody wants Gilts.

If the risk free rate of return is 5.7% and inflation target is 2% then the commercial bank rate should be…

5.7% + 2% + 1.5% = 9.2%

That’s what the commercial bank rate should be if inflation were under control. It’s not. CPI is 7.9%, which is ~590 basis points above target.

Another credit crunch seems quite likely from our circumstances today.