Could negative gilt yields be Boris Johnson's magic money tree?

A few months ago, Boris Johnson fought a general election saying that there was no ‘magic money tree’ and accusing Jeremy Corbyn of naively believing otherwise. This morning, something strange sprouted from the economic undergrowth, looking very much like a magic money tree. Britain sold its first long term bonds with negative yields: ie, sold at an average of -0.003 per cent. This dip below zero means investors are knowingly making a loss – paying more overall for the bonds than what their investment will return.

The yield may be only a fraction below zero, but its cross into negative territory marks a difficult moment for the prevailing economic narrative: that markets will punish the Government through the bond market if it overspends. Today’s news suggests the opposite – on a temporary basis at least, the government is being paid to borrow money. Investors are buying government debt, knowing they’ll make a loss, yet are still willing and eager to do so.